Registration Nos. 2-83538
811-3728
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
Post-Effective Amendment No. 21 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 22 [X]
(Check appropriate box or boxes)
New England Zenith Fund
- --------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
399 Boylston Street, Boston, Massachusetts 02116
- --------------------------------------------------
(Address of Principal Executive Offices)
(617) 267-6600
- -----------------------------------------------------
(Registrant's Telephone Number, including Area Code)
Robert P. Connolly, Esq. Copy to: Edward A. Benjamin, Esq.
New England Funds, L.P. Ropes & Gray
399 Boylston Street One International Place
Boston, Massachusetts 02116 Boston, Massachusetts 02110
- ---------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
(check appropriate box)
[] immediately upon filing pursuant to paragraph (b)of Rule 485
[] on (date) pursuant to paragraph (b)of Rule 485
[] 60 days after filing pursuant to paragraph (a)(1)of Rule 485
[X] on May 1, 1996 pursuant to paragraph (a)(1)of Rule 485
[] 75 days after filing pursuant to paragraph (a)(2) of Rule
485.
[] on (date) pursuant to paragraph (a)(2) of Rule 485.
Registrant has registered an indefinite number of securities
under the Securities Act of 1933 in accordance with Rule 24f-2
under the Investment Company Act of 1940, as amended. Registrant
filed on February 28, 1996, the Rule 24f-2 Notice for the
Registrant's fiscal year ended December 31, 1995.
<PAGE>
CROSS REFERENCE SHEET
Items required by Form N-1A
Item No.
of Form N-1A Caption in Prospectus
- -------------- ----------------------
1 . . . . . . . . . . . . . Cover Page
2 . . . . . . . . . . . . . Not Applicable
3 . . . . . . . . . . . . . Financial Highlights;
Performance Information
4 . . . . . . . . . . . . . The Fund; Investment Objectives and
Policies; Organization and
Capitalization of the Fund
5 . . . . . . . . . . . . . Management; Transfer Agent
6 . . . . . . . . . . . . . Organization and Capitalization of
the Fund; Dividends and Capital
Gain Distributions; Taxes;
Investment Objectives and Policies;
Voting Rights
7 . . . . . . . . . . . . . The Fund; Sale and Redemption of
Shares; Net Asset Values and
Portfolio Valuation
8 . . . . . . . . . . . . . Sale and Redemption of Shares; Net
Asset Values and Portfolio
Valuation
9 . . . . . . . . . . . . . Not Applicable
<PAGE>
Caption in Statement of
Additional Information
-------------------------
10 . . . . . . . . . . . . . Cover Page
11 . . . . . . . . . . . . . Table of Contents
12 . . . . . . . . . . . . . Not Applicable
13 . . . . . . . . . . . . . Investment Objectives and Policies;
Miscellaneous Investment Practices
14 . . . . . . . . . . . . . Trustees and Officers
15 . . . . . . . . . . . . . Description of the Fund;
Organization and Capitalization of
the Fund (in Prospectus)
16 . . . . . . . . . . . . . Advisory Agreements; Distribution
Agreement; Other Services
17 . . . . . . . . . . . . . Portfolio Transactions and
Brokerage
18 . . . . . . . . . . . . . Description of the Fund
19 . . . . . . . . . . . . . Determination of Net Asset Values
20 . . . . . . . . . . . . . Taxes (in Prospectus)
21 . . . . . . . . . . . . . Not Applicable
22 . . . . . . . . . . . . . Fund Performance
23 . . . . . . . . . . . . . Appendix C
<PAGE>
NEW ENGLAND ZENITH FUND
501 Boylston Street
Boston, Massachusetts 02116
(617) 267-6600
PROSPECTUS_May 1, 1996
New England Zenith Fund (the ''Fund'') offers fourteen
investment portfolios: the Loomis Sayles Small Cap Series, the
Draycott International Equity Series, the Alger Equity Growth
Series, the Capital Growth Series, the Loomis Sayles Avanti
Growth Series, the Venture Value Series, the Westpeak Value
Growth Series, the Westpeak Stock Index Series, the Loomis Sayles
Balanced Series, the Back Bay Advisors Managed Series, the
Salomon Brothers Strategic Bond Opportunities Series, the Back
Bay Advisors Bond Income Series, the Salomon Brothers U.S.
Government Series and the Back Bay Advisors Money Market Series
(each a ''Series'') with the following investment objectives:
Loomis Sayles Small Cap Series_long-term capital growth from
investments in common stocks or their equivalent.
Draycott International Equity Series_total return from long-
term growth of capital and dividend income, primarily through
investment in international equity securities.
Alger Equity Growth Series_long-term capital appreciation.
Capital Growth Series_long-term growth of capital.
Loomis Sayles Avanti Growth Series_long-term growth of capital.
Venture Value Series_growth of capital.
Westpeak Value Growth Series_long-term total return through
investment in equity securities.
Westpeak Stock Index Series_investment results that correspond
to the composite price and yield performance of United States
publicly traded common stocks.
Loomis Sayles Balanced Series_reasonable long-term investment
return from a combination of long-term capital appreciation and
moderate current income.
Back Bay Advisors Managed Series--a favorable total return
through investment in a diversified portfolio. The Series'
portfolio is expected to include a mix of (1) common stocks, (2)
notes and bonds and (3) money market instruments.
Salomon Brothers Strategic Bond Opportunities Series_a high
level of total return consistent with preservation of capital.
This Series may invest a significant portion of its assets in
lower rated bonds commonly known as junk bonds. Investors should
assess carefully the risks associated with investment in this
Series. See ''Investment Objectives and Policies_Salomon Brothers
Strategic Bond Opportunities Series'' and ''Investment
Risks_Lower Rated Fixed-Income Securities''.
Back Bay Advisors Bond Income Series_a high level of current
income consistent with protection of capital and moderate
investment risk.
Salomon Brothers U.S. Government Series_a high level of current
income consistent with preservation of capital and maintenance of
liquidity.
Back Bay Advisors Money Market Series_the highest possible
level of current income consistent with preservation of capital.
Money market funds are neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Series will
maintain a stable net asset value of $100 per share.
This Prospectus concisely describes the information that
prospective investors ought to know before investing. Please read
this Prospectus carefully and keep it for future reference.
A Statement of Additional Information (the ''Statement'') dated
May 1, 1996, is available free of charge by writing to New
England Securities Corporation (''New England Securities''), 399
Boylston Street, Boston, Massachusetts 02116. The Statement,
which contains more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the ''SEC'')
and is incorporated by reference in this Prospectus.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
---------
Financial Highlights B-4
The Fund B-24
Investment Objectives and Policies B-24
Investment Risks B-32
Performance Information B-42
Investment Restrictions B-46
Management B-51
Sale and Redemption of Shares B-60
Net Asset Values and Portfolio Valuation B-61
Dividends and Capital Gain Distributions B-61
Taxes B-61
Organization and Capitalization of the Fund B-62
Transfer Agent B-62
Voting Rights B-62
Appendix A B-63
<PAGE>
FINANCIAL HIGHLIGHTS
These tables have been examined by Coopers & Lybrand LLP, the
Fund's independent accountants, whose reports thereon for periods
after 1990 accompany the financial statements in the Statement of
Additional Information. The tables should be read in conjunction
with the financial statements and notes thereto. For further
performance information about the Fund, please refer to the
Fund's annual report, which is available free of charge.
LOOMIS SAYLES SMALL CAP SERIES
May 1(a) Year
to Ended
December 31, December 31,
1994 1995
Net Asset Value, Beginning of Period $100.00 $96.61
Income From Investment Operations
Net Investment Income 0.14 0.85
Net Gains or Losses on Investments (both
realized and unrealized) (3.38) 26.93
Total From Investment Operations (3.24) 27.78
Less Distributions
Distributions From Net Investment Income (0.15) (0.78)
Distributions From Net Realized Capital Gains 0.00 (4.81)
Total Distributions (0.15) (5.59)
Net Asset Value, End of the Period $96.61 $118.80
Total Return (%) (3.23)(b) 28.88
Ratio of Operating Expenses to Average Net 1.00 (c) 0.99
Assets (%)(d)
Ratio of Net Investment Income to Average Net 0.32 (c) 1.26
Assets (%)
Portfolio Turnover Rate (%) (a) 80 (c) 98
Net Assets, End of Period (000) $3,105 $27,741
The Ratio of Expenses to Average Net Assets
without giving effect to the voluntary
expense limitation described in Footnote (d)
would have been (%) 2.31 (c)(d) 1.91(d)
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) Computed on an annualized basis.
(d) During the period presented, the Series' adviser voluntarily
agreed to reduce its fees and, if necessary, to assume expenses
of the Series in order to limit the Series' expenses to an annual
rate of 1.00% of the Series' average daily net assets.
<PAGE>
DRAYCOTT INTERNATIONAL EQUITY SERIES
<TABLE>
<S> <C> <C>
October 31(a) Year
to Ended
December 31, December 31,
1994 1995
Net Asset Value, Beginning of Period $10.00 $10.23
Income From Investment Operations
Net Investment Income 0.03 .09
Net Gains or Losses on Investments
(both realized and unrealized) 0.23 0.53
Total From Investment Operations 0.26 0.62
Less Distributions
Distributions From Net Investment (0.02) (0.09)
Income
Distributions in Excess of Net 0.00 (0.03)
Investment Income
Distributions From Paid-In Capital (0.01) 0.00
Total Distributions (0.03) (0.12)
Net Asset Value, End of the Period $10.23 $10.73
Total Return (%) 2.60 (b) 6.03
Ratio of Operating Expenses to Average 1.30 (c) 1.30
Net Assets (%)(d)
Ratio of Net Investment Income to 2.56 (c) 1.29
Average Net Assets (%)
Portfolio Turnover Rate (%) 4 (c) 89
Net Assets, End of Period (000) $2,989 $16,268
The Ratio of Expenses to Average Net
Assets without giving effect to the
voluntary expense limitation described
in Footnote (d) would have been (%) 5.38 (c)(d) 3.12(d)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) Computed on an annualized basis.
(d) Commencing November 1, 1994, TNE Advisers has agreed to pay
operating expenses of the Series in excess of an annual expense
limit of 1.30% of average assets subject to the obligation of the
Series to repay TNE Advisers such expenses in future years, if
any, when the Series' expenses fall below this stated expense
limit; such deferred expenses may be charged to the Series in a
subsequent year to the extent that the charge does not cause the
total expenses in such subsequent year to exceed the 1.30%
expense limit; provided, however, that the Series is not
obligated to repay any expense paid by TNE Advisers more than two
years after the end of the fiscal year in which such expense was
incurred.
<PAGE>
ALGER EQUITY GROWTH SERIES
<TABLE>
October
31(a) Year
to Ended
December 31,December 31,
<S> 1994 1995
<C> <C>
Net Asset Value, Beginning of Period $10.00 $9.56
Income From Investment Operations
Net Investment Income 0.02 0.01
Net Gains or Losses on Investments (0.44) 4.65
(both realized and unrealized)
Total From Investment Operations (0.42) 4.66
Less Distributions
Distributions From Net Investment (0.02) (0.01)
Income
Distributions from Net Realized Capital 0.00 (0.41)
Gains
Total Distributions (0.02) (0.42)
Net Asset Value, End of the Period $9.56 $13.80
Total Return (%) (4.20)(b) 48.70
Ratio of Operating Expenses to Average 0.85 (c) 0.83
Net Assets (%)(d)
Ratio of Net Investment Income to 1.07 (c) 0.14
Average Net Assets (%)
Portfolio Turnover Rate (%) (a) 32 (c) 107
Net Assets, End of Period (000) $1,917 $46,386
The Ratio of Expenses to Average Net
Assets without giving effect to the
voluntary expense limitation described
in Footnote (d) would have been (%) 2.74 (c)(d) 2.45(d)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) Computed on an annualized basis.
(d) Commencing November 1, 1994, TNE Advisers has agreed to pay
operating expenses of the Series in excess of an annual expense
limit of 0.85% of average assets subject to the obligation of the
Series to repay TNE Advisers such expenses in future years, if
any, when the Series' expenses fall below this stated expense
limit; such deferred expenses may be charged to the Series in a
subsequent year to the extent that the charge does not cause the
total expenses in such subsequent year to exceed the 0.85%
expense limit; provided, however, that the Series is not
obligated to repay any expense paid by TNE Advisers more than two
years after the end of the fiscal year in which such expense was
incurred. Beginning January 1, 1996 the annual expense limit was
increased to 0.90% of average net assets.
<PAGE>
CAPITAL GROWTH SERIES
<TABLE>
Year Ended December 31,
--------------------------
-
<S> <C> <C> <C> <C>
1986 1987 1988 1989
------- ------- ------- -------
Net Asset value,
Beginning of
the Year
$179.48 $264.48 $231.33 $201.14
Income From
Investment
Operations
- --------------
Net Investment
Income 0.52 1.05 10.63 1.59
Net Gains or
Losses on
Investments
(both realized
and
unrealized)
131.12 109.33 (30.97) 60.11
Total From
Investment
Operations 131.64 110.38 (20.34) 61.70
Less distributions
- --------------------
Distributions
From Net
Investment
Income (0.90) (1.10) (9.55) (2.59)
Distributions
From Net
Realized
Capital Gains
(45.74) (142.43) (0.30) 0.00
Distributions
From Paid-in
Capital 0.00 0.00 0.00 0.00
Total
Distributions
(46.64) (143.53) (9.85) (2.59)
Net Asset Value,
End of the
Year $264.48 $231.33 $201.14 $260.25
Total Return (%) 95.2 52.7 (8.8) 30.8
Ratio of
Operating
Expenses to
Average Net
Assets(%) 0.83 0.57 0.75 0.72
Ratio of Net
Investment
Income to
Average Net
Assets (%) 0.22 0.75 6.20 1.21
Portfolio
Turnover Rate
(%) 527 368 813 269
Net Assets, End
of Period
(000) $6,797 $29,626 $42,538 $90,377
<PAGE>
CAPITAL GROWTH SERIES (continued)
Year Ended December 31,
-------------------------------------
1990 (a) 1991 1992 1993 1994 1995
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
the Year
$260.25 $249.04 $347.36 $322.23 $351.63 $312.30
Income From
Investment
Operations
Net Investment 1.78 3.16 4.04 2.12 5.28 3.47
Income
Net Gains or
Losses on
Investments
(both realized
and
unrealized)
(10.88) 130.75 (25.10) 46.21 (30.54) 114.91
Total From
Investment
Operations (9.10) 133.91 (21.06) 48.33 (25.26) 118.38
Less distributions
Distributions
From Net
Investment
Income (2.11) (3.22) (4.07) (2.18) (5.15) (3.48)
Distributions
From Net
Realized
Capital Gains
0.00 (31.93) 0.00 (16.75) (8.92) (52.58)
Distributions
From Paid-in
Capital 0.00 (0.44) 0.00 0.00 0.00 0.00
Total
Distributions
(2.11) (35.59) (4.07) (18.93) (14.07) (56.06)
Net Asset Value,
End of the
Year $249.04 $347.36 $322.23 $351.63 $312.30 $374.62
Total Return (%)
(3.5) 54.0 (6.1) 15.0 (7.1) 38.03
Ratio of
Operating
Expenses to
Average Net
Assets(%) 0.73 0.70 0.70 0.68 0.67 0.71
Ratio of Net
Investment
Income to
Average Net
Assets (%) 0.93 1.22 1.53 0.67 1.61 0.92
Portfolio
Turnover Rate
(%) 229 174 207 169 140 242
Net Assets, End
of Period
(000)
$148,254 $343,965 $472,017 $644,384 $667,127 $921,444
</TABLE>
(a) On March 1, 1990, the Capital Growth Management Division of
Loomis Sayles & Company, Incorporated was reorganized into
Capital Growth Management Limited Partnership, which assumed
management of the Series.
<PAGE>
LOOMIS SAYLES AVANTI GROWTH SERIES
<TABLE>
April Year Ended
30(a) to December 31,
December 31,
1993 1994 1995
<S> <C> <C> <C>
Net Asset Value, Beginning of the $100.00 $113.67 $112.77
Period
Income From Investment Operations
Net Investment Income 0.18 0.59 0.42
Net Gains or Losses on Investments 14.56 (0.89) 33.80
(both realized and unrealized)
Total From Investment Operations 14.74 (0.30) 34.22
Less Distributions
Distributions From Net Investment (0.18) (0.60) (0.40)
Income
Distributions From Net Realized (0.67) 0.00 (4.15)
Capital Gains
Distributions From Paid-In Capital (0.22) 0.00 0.00
Total Distributions (1.07) (0.60) (4.55)
Net Asset Value, End of the Period $113.67 $112.77 $142.44
Total Return (%) 14.7 (b) (0.3) 30.35
Ratio of Operating Expenses to 0.85 (c) 0.84 0.85
Average Net Assets (%)(d)
Ratio of Net Investment Income to 0.46 (c) 0.67 0.37
Average Net Assets (%)
Portfolio Turnover Rate (%) 21 (c) 67 58
Net Assets, End of Period (000) $11,972 $25,622 $48,832
The Ratio of Expenses to Average Net
Assets without giving effect to the
voluntary expense limitation
described in Footnote (d) would have 0.89(c)(d) 0.84(d) 1.06(d)
been (%)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) Computed on an annualized basis.
(d) During the periods presented, the Series' adviser
voluntarily agreed to reduce its fees and, if necessary, to
assume expenses of the Series in order to limit the Series'
expenses to an annual rate of 0.85% of the Series' average daily
net assets.
<PAGE>
VENTURE VALUE SERIES
<TABLE>
October Year
31(a) Ended
<S> to December
December 31, 1995
31, 1994 <C>
<C>
Net Asset Value, Beginning of Period $10.00 $9.62
Income From Investment Operations
Net Investment Income 0.03 0.10
Net Gains or Losses on Investments (0.38) 3.68
(both realized and unrealized)
Total From Investment Operations (0.35) 3.78
Less Distributions
Distributions From Net Investment (0.03) (0.10)
Income
Distributions From Net Realized Capital 0.00 (0.20)
Gains
Total Distributions (0.03) (0.30)
Net Asset Value, End of the Period $9.62 $13.10
Total Return (%) (3.50)(b) 39.28
Ratio of Operating Expenses to Average 0.90 (c) 0.90
Net Assets (%)(d)
Ratio of Net Investment Income to 2.54 (c) 1.39
Average Net Assets (%)
Portfolio Turnover Rate (%) (a) 1 (c) 20
Net Assets, End of Period (000) $3,371 $35,045
The Ratio of Expenses to Average Net
Assets without giving effect to the
voluntary expense limitation described
In Footnote (d) would have been (%) 3.97 (c)(d) 1.51(d)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) Computed on an annualized basis.
(d) Commencing November 1, 1994, TNE Advisers has agreed to pay
operating expenses of the Series in excess of an annual expense
limit of 0.90% of average assets subject to the obligation of the
Series to repay TNE Advisers such expenses in future years, if
any, when the Series' expenses fall below this stated expense
limit; such deferred expenses may be charged to the Series in a
subsequent year to the extent that the charge does not cause the
total expenses in such subsequent year to exceed the 0.90%
expense limit; provided, however, that the Series is not
obligated to repay any expense paid by TNE Advisers more than two
years after the end of the fiscal year in which such expense was
incurred.
<PAGE>
WESTPEAK VALUE GROWTH SERIES
April Year Ended December
30(a) 31,
to
December
31,
1993 1994 1995
Net Asset Value, Beginning of $100.00 $112.32 $109.03
the Period
Income From Investment
Operations
Net Investment Income 0.92 1.90 1.77
Net Gains or Losses on
Investments 13.33 (3.25) 37.91
(both realized and
unrealized)
Total From Investment 14.25 (1.35) 39.68
Operations
Less Distributions
Distributions From Net (0.92) (1.92) (1.71)
Investment Income
Distributions From Net (1.00) 0.00 (5.69)
Realized Capital Gains
Distributions In Excess of Net (0.01) 0.00 0.00
Realized Capital Gains
Distributions From Paid In 0.00 (0.02) 0.00
Capital
Total Distributions (1.93) (1.94) (7.40)
Net Asset Value, End of the $ 112.32 $109.03 $141.31
Period
Total Return (%) 14.2 (b) (1.2) 36.46
Ratio of Operating Expenses to
Average Net 0.85 (c) 0.85 0.85
Assets (%)(d)
Ratio of Net Investment Income 2.16 (c) 2.30 1.63
to Average Net Assets (%)
Portfolio Turnover Rate (%) 49 (c) 133 92
Net Assets, End of Period $9,082 $22,934 $48,129
(000)
The Ratio of Expenses to
Average Net Assets without
giving effect to the voluntary
expense limitation
described in Footnote (d)
would have been (%) 0.94 0.86(d) 1.06(d)
(c)(d)
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) Computed on an annualized basis.
(d) During the periods presented, the Series' adviser
voluntarily agreed to reduce its fees and, if necessary, to
assume expenses of the Series in order to limit the Series'
expenses to an annual rate of 0.85% of the Series' average daily
net assets.
<PAGE>
WESTPEAK STOCK INDEX SERIES
<TABLE>
Year Ended December 31,
--------------------------------------
Mar.
30(a)
to
Dec. 31,
1987 1988 1989 1990
<S> <C> <C> <C> <C>
------- ------- ------- -------
Net Asset
Value, $100.00 $84.74 $94.36 $117.36
Beginning of
the Year
Income From
Investment
Operations
Net Investment 2.44 3.48 3.55 3.76
Income
Net Gains or
Losses on
Investments (15.06) 10.39 24.83 (8.64)
(both realized
and
unrealized)
Total From
Investment (12.62) 13.87 28.38 (4.88)
Operations
Less distributions
Distributions
From Net (2.23) (3.44) (3.74) (3.82)
Investment
Income
Distributions
From Net (0.41) (0.81) (1.64) 0.00
Realized
Capital Gains
Distributions
in Excess of 0.00 0.00 0.00 0.00
Net Realized
Capital Gains
Distributions
From Paid-in 0.00 0.00 0.00 (0.17)
Capital
Total (2.64) (4.25) (5.38) (3.99)
Distributions
Net Asset
Value, End of $84.74 $94.36 $117.36 $108.49
Period
Total Return (12.2) 16.3 30.2 (4.1)
(%)
Ratio of
Operating 0.31 0.36 0.34 0.36
Expenses to
Average Net
Assets(%)
Ratio of Net
Investment
Income to 3.36 3.92 3.31 3.36
Average Net
Assets (%)
Portfolio
Turnover 31 4 52 1
Rate (%)
Net Assets, End
of $9,002 $11,073 $15,501 $15,122
Period
(000)
<PAGE>
WESTPEAK STOCK INDEX SERIES (continued)
Year Ended December 31,
------------------------------------------
1991 1992 1993* 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset
Value, $108.49 $137.39 $72.00 $76.48 $75.35
Beginning of
the Year
Income From
Investment
Operations
Net Investment 3.56 8.35 1.54 1.80 1.88
Income
Net Gains or
Losses on
Investments 29.29 2.02 5.18 (0.92) 25.89
(both realized
and
unrealized)
Total From
Investment 32.85 10.37 6.72 0.88 27.77
Operations
Less distributions
Distributions
From Net (3.56) (8.35) (1.36) (1.82) (1.85)
Investment
Income
Distributions
in Excess of 0.00 0.00 (0.18) 0.00 0.00
Net Investment
Income
Distributions
From Net (0.39) (67.41) (0.55) (0.16) (1.18)
Realized
Capital Gains
Distributions
in Excess of 0.00 0.00 (0.15) 0.00 0.00
Net Realized
Capital Gains
Distributions
From Paid-in 0.00 0.00 0.00 (0.03) 0.00
Capital
Total (3.95) (75.76) (2.24) (2.01) (3.03)
Distributions
Net Asset
Value, End of $137.39 $72.00 $76.48 $75.35 $100.09
the Year
Total Return 30.4 7.3 9.7 1.1 36.92
(%)
Ratio of
Operating 0.36 0.35 0.34 0.33 0.40
Expenses to
Average Net
Assets(%)
Ratio of Net
Investment
Income to 2.86 2.63 2.52 2.59 2.20
Average Net
Assets (%)
Portfolio
Turnover 2 17 12 2 5
Rate (%)
Net Assets, End
of $20,496 $10,172 $28,817 $37,164 $58,671
Period
(000)
<PAGE>
WESTPEAK STOCK INDEX SERIES (continued)
Year Ended December 31,
1991 1992 1993 1994 1995
The ratio of
expenses
without giving
effect to the
voluntary
expense __ __ __ __ 0.54
limitations
described in
Footnote (a)
would have
been
</TABLE>
*Westpeak Investment Advisors assumed responsibililty for
managing the Series' portfolio on August 1, 1993.
(a) Commencing November 1, 1994, TNE Advisers has agreed to pay
operating expenses in future years, if any, when the Series'
expenses fall below this stated expense limit; such deferred
expenses may be charged to the Series in a subsequent year to the
extent that the charge does not cause the total expenses in such
subsequent year to exceed the 0.40% expense limit; provided,
however, that the Series is not obligated to repay any expense
paid by TNE Advisers more than two years after the end of the
fiscal year in which such expense was incurred.
<PAGE>
LOOMIS SAYLES BALANCED SERIES
<TABLE>
October
31(a) Year
to Ended
December December
31, 1994 31, 1995
<S> <C> ]<C>
Net Asset Value, Beginning of Period $10.00 $9.94
Income From Investment Operations
Net Investment Income 0.05 0.26
Net Gains or Losses on Investments (0.06) 2.20
(both realized and unrealized)
Total From Investment Operations (0.01) 2.46
Less Distributions
Distributions From Net Investment (0.05) (0.26)
Income
Distributions in Excess of Net 0.00 (0.19)
Realized Capital Gains
Total Distributions (0.05) (0.45)
Net Asset Value, End of the Period $9.94 $11.95
Total Return (%) (0.10)(b) 24.79
Ratio of Operating Expenses to 0.85 (c) 0.84
Average Net Assets (%)(d)
Ratio of Net Investment Income to 4.16 (c) 4.03
Average Net Assets (%)
Portfolio Turnover Rate (%) (a) 0 (c) 72
Net Assets, End of Period (000) $2,722 $18,823
The Ratio of Expenses to Average Net
Assets without giving effect to the
voluntary expense limitation 3.73 (c)(d) 1.85(d)
described in Footnote (d) would have
been (%)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) Computed on an annualized basis.
(d) Commencing November 1, 1994, TNE Advisers has agreed to pay
operating expenses of the Series in excess of an annual expense
limit of 0.85% of average assets subject to the obligation of the
Series to repay TNE Advisers such expenses in future years, if
any, when the Series' expenses fall below this stated expense
limit; such deferred expenses may be charged to the Series in a
subsequent year to the extent that the charge does not cause the
total expenses in such subsequent year to exceed the 0.85%
expense limit; provided, however, that the Series is not
obligated to repay any expense paid by TNE Advisers more than two
years after the end of the fiscal year in which such expense was
incurred.
<PAGE>
BACK BAY ADVISORS MANAGED SERIES
<TABLE>
Year Ended December 31,
-------------------------------------
May 1(a)
to
Dec. 31,
1987 1988 1989 1990
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset
Value, $100.00 $96.62 $100.17 $114.65
Beginning of
the Year
Income From
Investment
Operations
Net Investment 2.80 5.13 4.31 5.47
Income
Net Gains or
Losses on
Investments (3.45) 4.04 14.77 (1.81)
(both realized
and
unrealized)
Total From
Investment (0.65) 9.17 19.08 3.66
Operations
Less distributions
Distributions
From Net (2.73) (5.24) (4.22) (5.38)
Investment
Income
Distributions
From Net 0.00 (0.38) (0.38) 0.00
Realized
Capital Gains
Distributions
From Paid-in 0.00 0.00 0.00 (0.14)
Capital
Total (2.73) (5.62) (4.60) (5.52)
Distributions
Net Asset
Value, End of $96.62 $100.17 $114.65 $112.79
the Year
Total Return (0.7) 9.5 19.1 3.2
(%)
Ratio of
Operating 0.66 0.64 0.57 0.57
Expenses to
Average Net
Assets(%)
Ratio of Net
Investment
Income to 4.96 5.88 5.29 5.58
Average Net
Assets (%)
Portfolio
Turnover 1 1 1 1
Rate (%)
Net Assets, End
of $7,694 $10,806 $23,622 $36,563
Period
(000)
<PAGE>
BACK BAY ADVISORS MANAGED SERIES (continued)
Year Ended December 31,
-----------------------------------------------
1991 1992 1993* 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset
Value, $112.79 $127.87 $130.26 $137.18 $130.30
Beginning of
the Year
Income From
Investment
Operations
Net Investment 6.41 5.145 4.35 5.42 6.34
Income
Net Gains or
Losses on
Investments 16.23 3.45 9.58 (6.92) 34.33
(both realized
and
unrealized)
Total From
Investment 22.64 8.59 13.93 (1.50) 40.67
Operations
Less distributions
Distributions
From Net (6.41) (5.13) (4.36) (5.38) (6.34)
Investment
Income
Distributions
in Excess of 0.00 0.00 0.00 0.00 (0.23)
Net Investment
Income
Distributions
From Net (1.15) (1.07) (2.65) 0.00 (0.88)
Realized
Capital Gains
Distributions
From Paid-in 0.00 0.00 0.00 0.00 0.00
Capital
Total (7.56) (6.20) (7.01) (5.38) (7.45)
Distributions
Net Asset
Value, End of $127.87 $130.26 $137.18 $130.30 $163.52
the Year
Total Return 20.2 6.7 10.7 (1.1) 31.26
(%)
Ratio of
Operating 0.55 0.54 0.53 0.54 0.64
Expenses to
Average Net
Assets(%)
Ratio of Net
Investment
Income to 5.45 5.32 3.65 3.98 4.06
Average Net
Assets (%)
Portfolio
Turnover 36 36 22 76 51
Rate (%)
Net Assets, End
of $49,995 $77,575 $121,339 $121,877 $147,536
Period
(000)
</TABLE>
(a) Commencement of operations
<PAGE>
SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES
October
31(a) Year
to Ended
December December
31, 1994 31, 1995
Net Asset Value, Beginning of Period $10.00 $9.74
Income From Investment Operations
Net Investment Income 0.12 0.58
Net Gains or Losses on Investments (0.26) 1.30
(both realized and unrealized)
Total From Investment Operations (0.14) 1.88
Less Distributions
Distributions From Net Investment (0.12) (0.55)
Income
Distributions From Net Realized 0.00 0.22
Capital Gains
Total Distributions (0.12) (0.77)
Net Asset Value, End of the Period $9.74 $10.85
Total Return (%) (1.40)(b) 19.38
Ratio of Operating Expenses to Average 0.85 (c) 0.84
Net Assets (%)(d)
Ratio of Net Investment Income to 7.05 (c) 8.39
Average Net Assets (%)
Portfolio Turnover Rate (%) (a) 403 (c) 202
Net Assets, End of Period (000) $3,450 $9,484
The Ratio of Expenses to Average Net
Assets without
giving effect to the voluntary 2.01 2.44(d)
expense limitation described in (c)(d)
Footnote (d) would have been (%)
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) Computed on an annualized basis.
(d) Commencing November 1, 1994, TNE Advisers has agreed to pay
operating expenses of the Series in excess of an annual expense
limit of 0.85% of average assets subject to the obligation of the
Series to repay TNE Advisers such expenses in future years, if
any, when the Series' expenses fall below this stated expense
limit; such deferred expenses may be charged to the Series in a
subsequent year to the extent that the charge does not cause the
total expenses in such subsequent year to exceed the 0.85%
expense limit; provided, however, that the Series is not
obligated to repay any expense paid by TNE Advisers more than two
years after the end of the fiscal year in which such expense was
incurred.
<PAGE>
BACK BAY ADVISORS BOND INCOME SERIES
<TABLE>
Year Ended December 31,
----------------------------------
1986 1987 1988 1989
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset
Value, $ $ $ 95.47 $92.75
Beginning of 119.34 123.45
the Year
Income From
Investment
Operations
Net Investment 10.2 8.97 8.52 8.58
Income
Net Gains or
Losses on
Investments 6.66 (7.14) (0.54) 2.81
(both realized
and
unrealized)
Total From
Investment 16.87 1.83 7.98 11.39
Operations
Less distributions
Distributions
From Net (11.09) (18.71) (10.70) (6.91)
Investment
Income
Distributions
in Excess of 0.00 0.00 0.00 0.00
Net Investment
Income
Distributions
From Net (1.67) (11.10) 0.00 0.00
Realized
Capital Gains
Total (12.76) (29.81) (10.70) (6.91)
Distributions
Net Asset
Value, End of $123.45 $95.47 $92.75 $97.23
the Year
Total Return 15.8 1.4 8.4 12.3
(%)
Ratio of
Operating 0.50 0.45 0.47 0.45
Expenses to
Average Net
Assets(%)
Ratio of Net
Investment
Income to 8.86 8.65 8.50 8.62
Average Net
Assets (%)
Portfolio
Turnover 303 331 104 69
Rate (%)
Net Assets, End
of $16,379 $17,449 $15,750 $26,156
Period
(000)
<PAGE>
BACK BAY ADVISORS BOND INCOME SERIES (continued)
Year Ended December 31,
--------------------------------------------------
1990 1991 1992 1993 1994 1995
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset
Value, $97.23 $97.61 $103.44 $103.47 $106.14 $95.53
Beginning of
the Year
Income From
Investment
Operations
Net Investment 8.49 8.53 7.96 5.70 7.05 7.34
Income
Net Gains or
Losses on
Investments (0.65) 8.90 0.51 7.38 (10.61) 12.85
(both realized
and
unrealized)
Total From
Investment 7.84 17.43 8.47 13.08 (3.56) 20.19
Operations
Less distributions
Distributions
From Net (7.46) (9.47) (6.87) (6.20) (7.05) (7.05)
Investment
Income
Distributions
In Excess of 0.00 0.00 0.00 (0.05) 0.00 0.00
Net Investment
Income
Distributions
From Net 0.00 (2.13) (1.57) (4.16) 0.00 0.00
Realized
Capital Gains
Total (7.46) (11.60) (8.44) (10.41) (7.05) (7.05)
Distributions
Net Asset
Value, End of $97.61 $103.44 $103.47 $106.14 $95.53 $108.67
the Year
Total Return 8.1 18.0 8.2 12.6 (3.4) 21.20
(%)
Ratio of
Operating 0.46 0.45 0.44 0.43 0.44 0.55
Expenses to
Average Net
Assets(%)
Ratio of Net
Investment
Income to 8.57 8.27 7.70 6.47 6.75 7.22
Average Net
Assets (%)
Portfolio
Turnover 106 193 71 177 82 73
Rate (%)
Net Assets, End
of $40,631 $49,369 $83,057 $131,242 $126,234 $162,712
Period
(000)
</TABLE>
As of January 1, 1993, the Bond Income Series discontinued the
use of equalization accounting.
<PAGE>
SALOMON BROTHERS U.S. GOVERNMENT SERIES
<TABLE>
October Year
31(a) Ended
to December 31,
December 31, 1995
<S> 1994 <C>
<C>
Net Asset Value, Beginning of Period $10.00 $9.96
Income From Investment Operations
Net Investment Income 0.10 0.33
Net Gains or Losses on Investments (0.04) 1.16
(both realized and unrealized)
Total From Investment Operations 0.06 1.49
Less Distributions
Distributions From Net Investment (0.10) (0.33)
Income
Distributions From Net Realized 0.00 (0.08)
Capital Gains
Total Distributions (0.10) (0.41)
Net Asset Value, End of the Period $9.96 $11.04
Total Return (%) 0.60 (b) 15.02
Ratio of Operating Expenses to Average 0.70 (c) 0.70
Net Assets (%)(d)
Ratio of Net Investment Income to 5.70 (c) 5.62
Average Net Assets (%)
Portfolio Turnover Rate (%) 1,409 (c) 415
Net Assets, End of Period (000) $2,012 $7,542
The Ratio of Expenses to Average Net
Assets without giving effect to the
voluntary expense limitation described 2.54 (c)(d) 2.90(d)
in Footnote (d) would have been (%)
</TABLE>
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) Computed on an annualized basis.
(d) Commencing November 1, 1994, TNE Advisers has agreed to pay
operating expenses of the Series in excess of an annual expense
limit of 0.70% of average assets subject to the obligation of the
Series to repay TNE Advisers such expenses in future years, if
any, when the Series' expenses fall below this stated expense
limit; such deferred expenses may be charged to the Series in a
subsequent year to the extent that the charge does not cause the
total expenses in such subsequent year to exceed the 0.70%
expense limit; provided, however, that the Series is not
obligated to repay any expense paid by TNE Advisers more than two
years after the end of the fiscal year in which such expense was
incurred.
<PAGE>
BACK BAY ADVISORS MONEY MARKET SERIES
<TABLE>
Year Ended December 31,
----------------------------------
1986 1987 1988 1989
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset
Value, $100.00 $100.00 $100.00 $100.00
Beginning of
the Year
Income From
Investment
Operations
Net Investment 6.58 6.33 7.25 8.85
Income
Total From
Investment 6.58 6.32 7.25 8.85
Operations
Less Distributions
Distributions
From Net (6.58) (6.32) (7.25) (8.85)
Investment
Income
Total (6.58) (6.32) (7.25) (8.85)
Distributions
Net Asset
Value, End of $100.00 $100.00 $100.00 $100.00
the Year
Total Return 6.8 6.6 7.4 9.2
(%)
Ratio of
Operating 0.39 0.38 0.38 0.38
Expenses to
Average Net
Assets(%)
Ratio of Net
Investment
Income to 6.61 6.37 7.26 8.85
Average Net
Assets (%)
Net Assets, End
of Period $26,794 $33,047 $38,929 $42,678
(000)
<PAGE>
BACK BAY ADVISORS MONEY MARKET SERIES (continued)
Year Ended December 31,
-----------------------------------------------------------
1990 1991 1992 1993 1994 1995
------- ------- ------- ------- ------- -------
Net Asset
Value, $100.00 $100.00 $100.00 $100.00 $100.00 $100.00
Beginning of
the Year
Income From
Investment
Operations
Net Investment 7.88 6.03 3.73 2.93 3.89 5.50
Income
Total From
Investment 7.88 6.03 3.73 2.93 3.89 5.50
Operations
Less distributions
Distributions
From Net (7.88) (6.03) (3.73) (2.93) (3.89) (5.50)
Investment
Income
Total (7.88) (6.03) (3.73) (2.93) (3.89) (5.50)
Distributions
Net Asset
Value, End of $100.00 $100.00 $100.00 $100.00 $100.00 $100.00
the Year
Total Return 8.2 6.2 3.8 3.0 4.0 5.64
(%)
Ratio of
Operating 0.38 0.38 0.38 0.38 0.40 0.50
Expenses to
Average Net
Assets(%)
Ratio of Net
Investment
Income to 7.87 6.01 3.71 2.93 3.89 5.50
Average Net
Assets (%)
Net Assets, End
of Period $60,071 $58,614 $61,607 $59,044 $73,960 $90,148
(000)
The Ratio of
Expenses to
Average Net
Assets without
giving effect
to the
voluntary -- -- -- -- -- 0.51
expense
limitations
described in
Footnote (a)
would have
been
</TABLE>
(a) Commencing November 1, 1994, TNE Advisers has agreed to pay
operating expenses of the Series in excess of an annual expense
limit of 0.50% of average assets subject to the obligation of the
Series to repay TNE Advisers such expenses in future years, if
any, when the Series' expenses fall below this stated expense
limit; such deferred expenses may be charged to the Series in a
subsequent year to the extent that the charge does not cause the
total expenses in such subsequent year to exceed the 0.50%
expense limit; provided, however, that the Series is not
obligated to repay any expense paid by TNE Advisers more than two
years after the end of the fiscal year in which such expense was
incurred.
<PAGE>
THE FUND
The Fund is a diversified, open-end management investment
company organized in 1987 as a Massachusetts business trust under
the laws of Massachusetts. The Fund is a series type company with
fourteen investment portfolios: the Loomis Sayles Small Cap
Series, the Draycott International Equity Series, the Alger
Equity Growth Series, the Capital Growth Series, the Loomis
Sayles Avanti Growth Series, the Venture Value Series, the
Westpeak Value Growth Series, the Westpeak Stock Index Series,
the Loomis Sayles Balanced Series, the Back Bay Advisors Managed
Series, the Salomon Brothers Strategic Bond Opportunities Series,
the Back Bay Advisors Bond Income Series, the Salomon Brothers
U.S. Government Series and the Back Bay Advisors Money Market
Series.
Shares in the Fund are not offered directly to the general
public and, currently, are available only to separate accounts
established by New England Variable Life Insurance Company
(''NEVLICO''), New England Mutual Life Insurance Company (''The
New England'') or subsidiaries of The New England as an
investment vehicle for variable life insurance or variable
annuity products, although not all Series may be available to all
separate accounts. In the future, however, such shares may be
offered to separate accounts of insurance companies unaffiliated
with NEVLICO or The New England.
INVESTMENT OBJECTIVES AND POLICIES
Loomis Sayles Small Cap Series
The Loomis Sayles Cap Series' investment objective is long-
term capital growth from investments in common stocks or their
equivalent.
Loomis Sayles, the Series'subadviser, manages the Series by
investing primarily in stocks of small cap companies with good
earnings growth potential that Loomis Sayles believes are
undervalued by the market. Typically, such companies range in
size from $100 million to $500 million in market capitalization,
have better than average growth rates at below average
price/earnings ratios and have strong balance sheets and cash
flow. Loomis Sayles seeks to build a core small cap portfolio of
solid growth company stocks, with a smaller emphasis on special
situations and turnarounds (companies that have experienced
significant business problems but which Loomis Sayles believes
have favorable prospects for recovery), as well as unrecognized
stocks.
Under unusual market conditions as determined by Loomis
Sayles, all or any portion of the Series may be invested, for
temporary, defensive purposes, in short-term debt instruments or
in cash. In addition, under normal conditions, a portion of the
Series' assets may be invested in short-term assets for liquidity
purposes or pending investment in other securities. Short-term
investments may include U.S. Government securities, certificates
of deposit, commercial paper and other obligations of corporate
issuers rated in the top two rating categories by a major rating
agency or, if unrated, determined to be of comparable quality by
the subadviser, and repurchase agreements that are fully
collateralized by cash, U.S. Government securities or high-
quality money market instruments.
Draycott International Equity Series
The Draycott International Equity Series seeks total return
from long-term growth of capital and dividend income, primarily
through investment in international equity securities.
The Series seeks to achieve its objective by investing
primarily in common stocks, although the Series may invest in any
type of equity securities. Normally the Series will invest at
least 65% of its total assets in equity securities of issuers
headquartered outside the United States, and substantially all of
its assets (other than cash and short-term investments) in such
equity securities or equity securities of issuers (including
closed-end investment companies) that derive a substantial part
of their revenues or profits from countries outside the United
States. Under normal conditions, the Series' portfolio will
contain equity securities of issuers from at least three
countries outside the United States.
The Series' subadviser, Draycott Partners, Ltd. (''Draycott''),
will make investment decisions on behalf of the Series by, first,
selecting countries where it anticipates sustainable growth that
will exceed current market expectations. Within the selected
countries, the subadviser will identify economic sectors that
appear to present the most potential for risk-adjusted growth and
finally, within the chosen economic sectors, the subadviser will
select securities that are expected to offer the best value.
Alger Equity Growth Series
The Alger Equity Growth Series' investment objective is to seek
long-term capital appreciation. The Series' assets will be
invested primarily in a diversified, actively managed portfolio
of equity securities, primarily of companies having a total
market capitalization of $1 billion or greater. These companies
may still be in the developmental stage, may be older companies
that appear to be entering a new stage of growth progress, or may
be companies providing products or services with a high unit
volume growth rate.
The Series' subadviser, Fred Alger Management, Inc. ("Alger
Management"), seeks to achieve its objective by investing in
equity securities, such as common or preferred stocks or
securities convertible into or exchangeable for equity
securities, including warrants and rights. Except during
temporary defensive periods, the Series invests at least 85% of
its net assets in equity securities and at least 65% of its total
assets in equity securities of companies that, at the time of
purchase of the securities, have total market capitalization of
$1 billion or greater; the Series may invest up to 35% of its
total assets in equity securities of companies that, at the time
of purchase, have total market capitalization of less than $1
billion. The Series anticipates that it will invest primarily in
companies whose securities are traded on domestic stock exchanges
or in the over-the-counter market.
The Series may invest in bank and thrift obligations,
obligations issued or guaranteed by the U.S. Government or by its
agencies or instrumentalities, foreign bank obligations and
obligations of foreign branches of domestic banks, and variable
rate master demand notes.
The Series may also hold up to 15% of its net assets in money
market instruments and repurchase agreements, purchase restricted
securities (including Rule 144A securities) and enter into
''short sales against the box.''
The Series may lend securities it owns so long as such loans do
not exceed 331/3% of the Series' total assets.
Capital Growth Series
The Capital Growth Series, which is advised by Capital Growth
Management Limited Partnership (''CGM''), seeks long-term growth
of capital through investment primarily in equity securities of
companies whose earnings are expected to grow at a faster rate
than the United States economy. Most of the Series' investments
are normally in common stocks, although the Series may invest in
any type of equity securities. Equity securities are common
stocks and securities convertible into common stocks. The Series
does not consider current income as a significant factor in
selecting its investments. Equity securities are volatile
investments, subject to price declines as well as advances, and
involve greater risks than some other investment media.
Loomis Sayles Avanti Growth Series
The Loomis Sayles Avanti Growth Series seeks long-term growth
of capital. The Series ordinarily invests substantially all of
its assets in equity securities. Investments are selected based
on their growth potential; current income is not a consideration.
The Series normally will invest primarily in equity securities of
companies with medium and large capitalization (capitalization of
$1 billion to $5 billion and over $5 billion, respectively), but
will also invest a portion of its assets in equity securities of
companies with relatively small market capitalization (under $1
billion). The Series may invest a limited portion of its assets
in securities of foreign issuers. See "Investment Risks -
Foreign Securities" below.
Loomis Sayles, the Series' subadviser, selects investments
based upon fundamental research and analysis of individual
companies and industries. The subadviser selects investments for
the Series based on qualitative and quantitative criteria
including, among others, industry dominance and competitive
position, consistent earnings growth, a history of high
profitability, the subadviser's expectation of continued high
profitability and overall financial strength, although not every
investment will have all of these characteristics.
The Series may invest in convertible securities, including
corporate bonds, notes or preferred stocks that can be converted
into common stocks or other equity securities.
Venture Value Series
The Series' investment objective is growth of capital. The
Series' subadviser is Davis Selected Advisers, L.P. ("Davis
Selected").
The Series will primarily invest in domestic common stocks that
Davis Selected believes have capital growth potential due to
factors such as undervalued assets or earnings potential, product
development and demand, favorable operating ratios, resources for
expansion, management abilities, reasonableness of market price,
and favorable overall business prospects. The Series will
generally invest predominantly in equity securities of companies
with market capitalizations of at least $250 million. It may also
invest in issues with smaller capitalizations.
The Series may invest in foreign securities, and may hedge
currency fluctuation risks related thereto. The Series may invest
in U.S. registered investment companies that primarily invest in
foreign securities, provided that no such investment may cause
more than 10% of the Series' total assets to be invested in such
companies. The Series may invest in restricted securities, which
may include Rule 144A securities.
The Series may write covered call options on its portfolio
securities, but currently intends to invest in such options only
to the extent that less than 5% of its net assets would be
subject to the options.
The Series may lend securities it owns so long as such loans do
not exceed 5% of the Series' net assets.
Westpeak Value Growth Series
The Series, for which Westpeak Investment Advisors, L.P.
("Westpeak") acts as subadviser, seeks long-term total return
(capital appreciation and dividend income) through investment in
equity securities. Emphasis will be given to both undervalued
securities (''value'' style) and securities of companies with
growth potential (''growth'' style). The Series will ordinarily
invest substantially all its assets in equity securities.
The Series may engage in transactions in futures contracts
solely for the purpose of maintaining full exposure of the
portfolio to the movements of broad equity markets at times when
the Series holds a cash position pending investment in stocks or
in anticipation of redemptions. See ''Futures and Other Hedging
Transactions'' under ''Investment Risks'' below and ''Futures''
in the Statement of Additional Information.
Westpeak Stock Index Series
The Series, for which Westpeak Investment Advisors, L.P.
("Westpeak") acts as subadviser, seeks to provide investment
results that correspond to the composite price and yield
performance of United States publicly traded common stocks. The
Series seeks to achieve this investment objective by attempting
to duplicate the composite price and yield performance of the
Standard & Poor's 500 Composite Stock Price Index (the ''S&P 500
Index'').
The S&P 500 Index fluctuates with changes in the market value
of the stocks included in the Index. An investment in the Series
involves risks similar to the risks of investing directly in the
stocks included in the S&P 500 Index.
The Series seeks to duplicate the composite price and yield
performance of the S&P 500 Index at lower cost without investing
in all of the 500 stocks included in the Index by selecting
stocks having a combination of characteristics similar to the
omitted stocks and, in order to minimize ''tracking error,''
adjusting the proportions of the stocks included in the Series'
portfolio relative to each stock's weighting in the S&P 500
Index. (''Tracking error'' is a statistical measure of the
difference between the investment results of the Series, before
taking into account the Series' expenses, and the investment
results of the S&P 500 Index.)
Westpeak currently expects that, depending on its size, the
Westpeak Stock Index Series will ordinarily invest in
approximately 300 of the 500 stocks included in the S&P 500
Index. From time to time and over any period of time, this number
may be significantly higher or lower, depending on the size of
the Series and on Westpeak's judgment as to the appropriate
number of stocks in which to invest in order to approximate the
composite price and yield performance of the S&P 500 Index. In
the future, however, the Series may, without shareholder
approval, select a stock index other than the S&P 500 Index as
the standard of comparison for the Series' investments, or
discontinue the practice of using a stock index as the standard
of comparison for the common stock portion of the Series'
portfolio. The Series may also engage in futures transactions to
reduce tracking error. See ''Futures and Other Hedging
Transactions'' under ''Investment Risks'' below and ''Futures''
in the Statement of Additional Information.
Loomis Sayles Balanced Series
The Series' investment objective is reasonable long-term
investment return from a combination of long-term capital
appreciation and moderate current income.
The Series, for which Loomis Sayles acts as subadviser, is
''flexibly managed'' in that sometimes it invests more heavily in
equity securities and at other times it invests more heavily in
fixed-income securities, depending on Loomis Sayles' view of the
economic and investment outlook. Most of the Series' investments
are normally in dividend-paying common stocks of recognized
investment quality that are expected to achieve growth in
earnings and dividends over the long term. Fixed-income
securities include notes, bonds, non-convertible preferred stock
and money market instruments. The Series may invest in adjustable
rate mortgage securities, asset-backed securities, stripped
mortgage securities (see "STRIPS" in the Statement of Additional
Information) and inverse floaters, subject to a limit of 5% of
the Series' assets for each of these instruments. The Series may
invest in securities rated BB or Ba by Standard & Poor's Ratings
Group ("Standard & Poor's or "S & P") or Moody's Investors
Service, Inc. ("Moody's") or lower (or in unrated securities that
Loomis Sayles determines to be of comparable quality). During
the fiscal year ended December 31, 1995, __% of the average month-
end net assets of the Series was invested in fixed-income
securities rated in the rating category (BB or Ba) just below
investment grade and no assets were invested in fixed-income
securities rated below this level. The Series invests at least
25% of its assets in fixed-income senior securities and, under
normal market conditions, more than 50% of its assets in equity
securities. The Series also may invest in foreign securities.
See "Investment Risks - Foreign Securities" below.
Back Bay Advisors Managed Series
The investment objective of the Series is to provide a
favorable total investment return through investment in a
diversified portfolio of common stocks and fixed income
securities. These investments will be made in proportions that
Back Bay Advisors, L.P. ("Back Bay Advisors"), the Series'
subadviser, deems appropriate for an investor who wishes to
invest in a portfolio containing a diversified mix of assets.
It is expected that more often than not the investment
portfolio of the Series will contain a higher proportion of
common stocks than of notes and bonds, and a higher proportion of
notes and bonds than of money market instruments. However, Back
Bay Advisors will make variations in the proportions of each
investment category in accordance with its assessment of the
outlook for the economy and the financial markets and its
judgment about the relative attractiveness of each asset type in
light of economic conditions. The Series may also engage in
futures transactions to manage its portfolio exposure to the
risks of investment in common stocks or notes and bonds. The
Series will engage in futures transactions only to the extent
allowed by state law and regulations. See ''Investment Risks -
Futures and Other Hedging Transactions'' below and ''Futures'' in
the Statement of Additional Information.
The investment practices with respect to the common stock
portion of the Series center upon selecting a portfolio of
securities, drawn from the S&P 500, which taken as a group can be
characterized as high capitalization growth issues. A
proprietary quantitative model is used to achieve an industry
sector-neutral investment approach. In addition, as conditions
warrant, a portion of the stock portfolio may be invested in
"value" situations, as identified by Back Bay Advisors'
quantitative model. In the future, however, the Series may,
without shareholder approval, select a stock index other than the
S&P 500 Index as the standard of comparison for the Series'
common stock investments, or discontinue the practice of using a
stock index as the standard of comparison for the common stock
portion of the Series' portfolio. The Series may invest a limited
portion of its assets in securities of foreign issuers and may
invest in convertible securities. See "Investment Risks -
Foreign Securities."
The fixed income portion of the Series' portfolio will be
invested in bonds of the types in which the Back Bay Advisors
Bond Income Series is permitted to invest. See ''Back Bay
Advisors Bond Income Series'' above for a description of these
types of investments and some possible risks associated with
them. During the fiscal year ended December 31, 1995, 2.7% of
the average month-end net assets of the Series was invested in
fixed-income securities rated in the rating category (BB or Ba)
just below investment grade and no assets were invested in fixed-
income securities rated below this level.
Salomon Brothers Strategic Bond Opportunities Series
The Salomon Brothers Strategic Bond Opportunities Series'
investment objective is to seek a high level of total return
consistent with preservation of capital.
Based upon Salomon Brothers Asset Management Inc's, which acts
as sub-adviser to the Series, assessment of the relative risks
and opportunities available in various market segments, assets
will be allocated among U.S. Government obligations, mortgage
backed securities, domestic and foreign corporate debt and
sovereign debt securities rated investment grade (BBB or higher
by S&P or Baa or higher by Moody's) (or unrated but deemed to be
of equivalent quality in the subadviser's judgment) and domestic
and foreign corporate debt and sovereign debt securities rated
below investment grade. The Series may invest in fixed and
floating rate loans (''Loans'') arranged through private
negotiations between a foreign sovereign entity and one or more
financial institutions, in the form of participations in such
Loans (''Participations'') and assignments of all or a portion of
Loans from third parties (''Assignments''). See ''Loan
Participations and Assignments'' below.
Depending on market conditions, the Series may invest without
limit in below investment grade securities, which involve
significantly greater risks, including price volatility and risk
of default in the payment of interest and principal, than higher-
quality securities. Although the Series' subadviser does not
anticipate investing in excess of 75% of the Series' assets in
domestic and developing country debt securities that are rated
below investment grade, the Series may invest a greater
percentage in such securities when, in the opinion of the
subadviser, the yield available from such securities outweighs
their additional risks. Certain of the debt securities in which
the Series may invest may be rated as low as ''C'' by Moody's or
''D'' by S&P or may be considered comparable to securities having
such ratings. Securities of below investment grade quality are
considered high yield, high risk securities and are commonly
known as ''junk bonds.'' See ''Investment Risks_Lower Rated Fixed-
Income Securities'' below. During the fiscal year ended December
31, 1995, __% of the average month-end net assets of the Series
was invested in fixed-income securities rated in the rating
category (BB or Ba) just below investment grade and no assets
were invested in fixed-income securities rated below this level.
In addition, the Series may invest in securities issued or
guaranteed as to principal or interest by the U.S. Government or
its agencies or instrumentalities, including mortgage backed
securities and may also invest in preferred stocks, convertible
securities (including those issued in the Euromarket), securities
carrying warrants to purchase equity securities, privately placed
debt securities, stripped mortgage securities, zero coupon
securities and inverse floaters.
The Series may, and the subadviser anticipates that under
certain market conditions it will, invest up to 100% of its
assets in foreign securities, including Brady Bonds. Brady Bonds
are debt obligations created through the exchange of commercial
bank loans for new obligations under a plan introduced by former
U.S. Treasury Secretary Nicholas Brady. See ''High Yield/High
Risk Foreign Sovereign Debt Securities'' below. There is no limit
on the value of the Series' assets that may be invested in any
one country or in assets denominated in any one country's
currency.
The Series may also invest in debt obligations issued or
guaranteed by a foreign sovereign government or one of its
agencies or political subdivisions and debt obligations issued or
guaranteed by supranational entities. Supranational entities
include international organizations designated or supported by
governmental entities to promote economic reconstruction or
development and international banking institutions and related
government agencies. Examples include the International Bank for
Reconstruction and Development (the ''World Bank''), the European
Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. Such supranational issued
instruments may be denominated in multi-national currency units.
The Series currently intends to invest substantially all of its
assets in fixed-income securities. In order to maintain
liquidity, the Series may invest up to 20% of its assets in high-
quality short-term money market instruments.
The Series' subadviser will have discretion to select the range
of maturities of the various fixed-income securities in which the
Series will invest. The weighted average life of the Series may
vary substantially from time to time depending on economic and
market conditions.
The Series may purchase and sell (or write) exchange-listed and
over-the-counter put and call options on securities, financial
futures contracts and fixed income indices and other financial
instruments, enter into financial futures contracts, enter into
interest rate transactions, and enter into currency transactions.
Interest rate transactions may take the form of swaps, structured
notes, caps, floors and collars, and currency transactions may
take the form of currency forward contracts, currency futures
contracts, currency swaps and options on currencies or currency
futures contracts. See ''Futures and Other Hedging Transactions''
under ''Investment Risks'' below and ''Futures'' in the Statement
of Additional Information.
The Series may lend securities it owns so long as such loans do
not represent more than 20% of the Series' total assets.
Back Bay Advisors Bond Income Series
The investment objective of the Series is to provide a high
level of current income consistent with protection of capital and
moderate investment risk through investment primarily in U.S.
Government and corporate bonds. In general, fixed-income
securities, such as the bonds in which the Series may invest, are
subject to credit risk (the risk that the obligor will default in
the payment of principal and/or interest) and to market risk (the
risk that the market value of the securities will change as a
result of changes in market rates of interest). The Series may
also invest in convertible securities. See "Investment Risks -
Convertible Securities" below.
At least 80% of the Series' assets will consist of securities
rated AAA, AA, A or BBB by S&P or Aaa, Aa, A or Baa by Moody's or
unrated but determined by Back Bay Advisors, the Series'
subadviser, to be of comparable quality to securities in those
rating categories. The Series may not invest more than 10% of its
total net assets in obligations of foreign issuers. Investments
in foreign securities will subject the Series to special
considerations related to political, economic and legal
conditions outside of the U.S. These considerations include the
possibility of unfavorable currency exchange rates, exchange
control regulations (including currency blockage), expropriation,
nationalization, withholding taxes on income and difficulties in
enforcing judgments. Foreign securities may be less liquid and
more volatile than comparable U.S. securities. Some foreign
issuers are subject to less comprehensive accounting and
disclosure requirements than similar U.S. issuers. Transactions
in foreign securities include currency conversion costs.
Brokerage and custodial costs for foreign securities may be
higher than for U.S. securities. The Series will invest in these
securities only when Back Bay Advisors believes the associated
risks are minimal.
Up to 20% of the Series' assets may be invested in securities
rated BB or Ba or lower (or in unrated securities that Back Bay
Advisors determines to be of comparable quality). During the
fiscal year ended December 31, 1995, ____% of the average month-
end net assets of the Series was invested in fixed-income
securities rated in the rating category (BB or Ba) just below
investment grade and no assets were invested in fixed-income
securities rated below this level. Securities rated BB or lower
by S&P or Ba or lower by Moody's (or unrated but determined to be
of comparable quality by Back Bay Advisors) are considered high
yield, high risk securities and are commonly known as ''junk
bonds." The Series will acquire no security rated below BB or Ba
(or unrated but determined to be of comparable quality by Back
Bay Advisors). If a security held by the Series is downgraded
below BB or Ba, Back Bay Advisors will determine at that time
whether the Series will continue to hold the security, taking
into account the current conditions.
The average maturity of the Back Bay Advisors Bond Income
Series' portfolio will usually be between five and fifteen years.
Salomon Brothers U.S. Government Series
The Series' investment objective is to provide a high level of
current income consistent with preservation of capital and
maintenance of liquidity.
The Series seeks to achieve its objective by investing
primarily in debt obligations (including mortgage backed
securities) issued or guaranteed by the U.S. Government or its
agencies, authorities or instrumentalities or derivative
securities (such as collateralized mortgage obligations) backed
by such securities.
At least 80% of the total assets of the Series will be invested
in:
(1) mortgage backed securities guaranteed by the Government
National Mortgage Association (''GNMA'') that are supported by
the full faith and credit of the U.S. Government. Such securities
entitle the holder to receive all interest and principal payments
due, whether or not payments are actually made on the underlying
mortgages;
(2) U.S. Treasury obligations;
(3) debt obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government which are backed by
their own credit but are not necessarily backed by the full faith
and credit of the U.S. Government;
(4) mortgage related securities guaranteed by agencies or
instrumentalities of the U.S. Government which are supported by
their own credit but not the full faith and credit of the U.S.
Government, such as the Federal Home Loan Mortgage Corporation
and Federal National Mortgage Association ("FNMA"), and
(5) collateralized mortgage obligations issued by private
issuers for which the underlying mortgage backed securities
serving as collateral are backed (i) by the credit of the U.S.
Government agency or instrumentality which issues or guarantees
the mortgage backed securities, or (ii) by the full faith and
credit of the U.S. Government.
Under normal market conditions, at least 65% of the Series'
total assets will be invested in securities issued or guaranteed
by the U.S. Government or an agency, authority or instrumentality
thereof. For purposes of this policy, securities that are not
issued or guaranteed by the U.S. Government or an agency,
authority or instrumentality will not count toward the 65%, even
if they are backed by mortgages (or other collateral) that are so
guaranteed.
Any guarantee of the securities in which the Series invests
runs only to principal and interest payments on the securities
and not to the market value of such securities or the principal
and interest payments on the underlying mortgages. In addition,
the guarantee runs to the portfolio securities held by the Series
and not to the purchase of shares of the Series.
The Series may purchase or write options on securities, options
on securities indices and options on futures contracts and buy or
sell futures on financial instruments and securities indices.
Up to 20% of the total assets of the Series may be invested in
marketable debt securities of domestic issuers and of foreign
issuers (payable in U.S. dollars) rated at the time of purchase
Baa or higher by Moody's or BBB or higher by S&P, or, if unrated,
deemed to be of equivalent quality in Salomon Brothers Management
Inc's judgment, convertible securities (including those issued in
the Euromarket), securities carrying warrants to purchase equity
securities and privately placed debt securities.
The Series may lend securities it owns so long as such loans do
not represent more than 20% of the Series' total assets.
Back Bay Advisors Money Market Series
The Series seeks the highest possible level of current
income consistent with preservation of capital through investment
in a managed portfolio of high quality money market instruments
including: (1) obligations backed by the full faith and credit of
the United States Government, such as bills, notes and bonds
issued by the U.S. Treasury or by such government agencies as the
Farmers' Home Administration or the Small Business
Administration; (2) other obligations issued or guaranteed by the
United States Government or its agencies, authorities or
instrumentalities, such as obligations of the Tennessee Valley
Authority, Federal Land Banks and FNMA (together with full faith
and credit obligations, ''U.S. Government Securities''); (3)
commercial paper and other corporate debt obligations rated in
the highest rating category by Standard & Poor's or Moody's or,
if unrated, of comparable quality as determined by Back Bay
Advisors, L.P. (''Back Bay Advisors''), the Series' subadviser,
under guidelines approved by the Fund's Trustees; (4) repurchase
agreements relating to any of the above and (5) obligations of
banks or savings and loan associations (such as bankers'
acceptances and certificates of deposit, including Eurodollar
obligations of foreign branches of U.S. banks and dollar
denominated obligations of U.S. and United Kingdom branches of
foreign banks) whose net assets exceed $100,000,000;
The Series may invest up to 100% of its assets in certificates
of deposit, bankers' acceptances and other bank obligations.
All the Series' money market instruments mature in less than
397 days and its dollar-weighted average portfolio maturity is 90
days or less. The Series calculates the maturity of repurchase
agreements by reference to the repurchase date, not by reference
to the maturity of the underlying security.
By investing only in high quality, short-term securities, the
Series seeks to minimize credit risk and market risk. Credit risk
is the risk that the obligor will default in the payment of
principal and/or interest. In a repurchase agreement transaction,
credit risk relates to the performance by the other party of its
obligation to repurchase the underlying security from the Series.
If the other party defaults on that obligation, the Series may
face various delays and risks of loss. Market risk is the risk
that the market value of the securities will change as a result
of changes in market rates of interest. The Series expects that
those changes will be minimal and that the Series will be able to
maintain the net asset value of its shares at a constant of $100,
although this cannot be assured.
The Eurodollar obligations of foreign branches of U.S. banks
and U.S. and United Kingdom branches of foreign banks in which
the Series may invest may be subject to certain risks which do
not apply to obligations of domestic branches of U.S. banks.
These risks may relate to foreign economic, political and legal
developments and to the fact that foreign banks and foreign
branches of U.S. banks may be subject to different regulatory
requirements.
Additional Information
Except for the investment objective of the Loomis Sayles Small
Cap, Capital Growth, Loomis Sayles Avanti Growth, Westpeak Value
Growth, Westpeak Stock Index, Back Bay Advisors Managed, Back Bay
Advisors Bond Income and Back Bay Advisors Money Market Series,
or except as otherwise explicitly stated in this Prospectus or
the Statement, each Series' investment policies may be changed at
any time without shareholder approval.
Equity securities are securities that represent an ownership
interest (or the right to acquire such an interest) in a company,
and include common and preferred stocks and securities
exercisable for or convertible into common or preferred stocks
(such as warrants, convertible debt securities and convertible
preferred stock).
The Loomis Sayles Small Cap Series, Draycott International
Equity Series, Alger Equity Growth Series, Capital Growth Series,
Loomis Sayles Avanti Growth Series, Venture Value Series,
Westpeak Value Growth Series and Westpeak Stock Index Series seek
to attain their objectives by normally investing their assets
primarily in equity securities. When the particular Series'
adviser or subadviser deems it appropriate, however, any of these
Series may, for temporary defensive purposes, hold all or a
substantial portion of its assets in cash or fixed-income
investments, including U.S. Government obligations, investment
grade (and comparable unrated) corporate bonds or notes, money
market instruments, bankers acceptances and repurchase
agreements. In addition, the Draycott International Equity Series
may invest temporarily in foreign government, agency or corporate
debt obligations. No estimate can be made as to when or for how
long any Series will employ defensive strategies.
INVESTMENT RISKS
Equity Securities (Loomis Sayles Small Cap, Draycott
International Equity, Alger Equity Growth, Capital Growth, Loomis
Sayles Avanti Growth, Venture Value, Westpeak Value Growth,
Westpeak Stock Index, Loomis Sayles Balanced and Back Bay
Advisors Managed Series)
Equity securities are more volatile and more risky than some
other forms of investment. Therefore, the value of your
investment in a Series may sometimes decrease instead of
increase. Investments in companies with relatively small
capitalization may involve greater risk than is usually
associated with more established companies. These companies often
have sales and earnings growth rates which exceed those of
companies with larger capitalization. Such growth rates may in
turn be reflected in more rapid share price appreciation.
However, companies with smaller capitalization often have limited
product lines, markets or financial resources and they may be
dependent upon a relatively small management group. The
securities may have limited marketability and may be subject to
more abrupt or erratic movements in price than securities of
companies with larger capitalization or the market averages in
general. The net asset value of a Series that invests in
companies with smaller capitalization, therefore, may fluctuate
more widely than market averages.
Convertible Securities (Draycott International Equity, Alger
Equity Growth, Capital Growth, Loomis Sayles Avanti Growth,
Loomis Sayles Balanced, Back Bay Advisors Managed, Salomon
Brothers Strategic Bond Opportunities and Back Bay Advisors Bond
Income Series)
Convertible securities include debt securities or preferred stock
that are convertible into stock as well as other securities, such
as warrants, that provide an opportunity for equity
participation. Because convertible securities can be converted
into equity securities, their values will normally increase or
decrease as the values of the underlying equity securities
increase or decrease. The movements in the prices of convertible
securities, however, may be smaller than the movements in the
value of the underlying equity securities. Convertible debt and
preferred stock usually provide a higher yield than the
underlying equity securities, however, so that the price decline
of a convertible security may sometimes be less substantial than
that of the underlying equity securities. The value of
convertible securities that pay dividends or interest, like the
value of all fixed-income securities, generally fluctuates
inversely with changes in interest rates. Warrants have no voting
rights, pay no dividends and have no rights with respect to the
assets of the corporation issuing them. They do not represent
ownership of the securities for which they are exercisable, but
only the right to buy such securities at a particular price. The
Loomis Sayles Avanti Growth Series will not purchase any
convertible debt security or convertible preferred stock that has
not been rated at the time of acquisition investment grade by one
major rating agency or that is not rated but is determined to be
of comparable quality by the Series' adviser.
Fixed-Income Securities (All Series)
Fixed-income securities include a broad array of short, medium
and long term obligations issued by the U.S. or foreign
governments, government or international agencies and
instrumentalities, and corporate issuers of various types. Some
fixed income securities represent uncollateralized obligations of
their issuers; in other cases, the securities may be backed by
specific assets (such as mortgages or other receivables) that
have been set aside as collateral for the issuer's obligation.
Fixed-income securities generally involve an obligation of the
issuer to pay interest or dividends on either a current basis or
at the maturity of the security, as well as the obligation to
repay the principal amount of the security at maturity.
Fixed-income securities involve both credit risk and market risk.
Credit risk is the risk that the security's issuer will fail to
fulfill its obligation to pay interest, dividends or principal on
the security. Market risk is the risk that the value of the
security will fall because of changes in market rates of
interest. (Generally, the value of fixed-income securities falls
when market rates of interest are rising.) Some fixed-income
securities also involve prepayment or call risk. This is the
risk that the issuer will repay a Series the principal on the
security before it is due, thus depriving the Series of a
favorable stream of future interest or dividend payments.
Because interest rates vary, it is impossible to predict the
income for any particular period of a Series that invests in
fixed-income securities. Fluctuations in the value of a Series'
investments in fixed-income securities will cause a Series' net
asset value to increase or decrease.
Lower Rated Fixed-Income Securities (Loomis Sayles Balanced, Back
Bay Advisors Managed, Salomon Brothers Strategic Bond
Opportunities and Back Bay Advisors Bond Income Series)
Fixed-income securities rated BB or lower by S&P or Ba or lower
by Moody's (and comparable unrated securities) are of below
"investment grade" quality. Lower quality fixed-income
securities generally provide higher yields, but are subject to
greater credit and market risk than higher quality fixed-income
securities. Lower quality fixed-income securities are considered
predominantly speculative with respect to the ability of the
issuer to meet principal and interest payments. Achievement of
the investment objective of a mutual fund investing in lower
quality fixed-income securities may be more dependent on the
Series' sub-adviser's own credit analysis than for a fund
investing in higher quality bonds. The market for lower quality
fixed-income securities may be more severely affected than some
other financial markets by economic recession or substantial
interest rate increases, by changing public perceptions of this
market or by legislation that limits the ability of certain
categories of financial institutions to invest in these
securities. In addition, the secondary market may be less liquid
for lower rated fixed-income securities. This lack of liquidity
at certain times may affect the valuation of these securities and
may make the valuation and sale of these securities more
difficult. Securities of below investment grade quality are
considered high yield, high risk securities and are commonly
known as "junk bonds." For more information, including a
detailed description of the ratings assigned by S&P and Moody's,
please refer to "Appendix A - Ratings of Securities."
Mortgage-Related Securities (Loomis Sayles Balanced, Back Bay
Advisors Managed, Salomon Brothers Strategic Bond Opportunities,
Back Bay Advisors Bond Income and Salomon Brothers U.S.
Government Series)
Mortgage-related securities, such as GNMA or FNMA certificates,
differ from traditional debt securities. Among the major
differences are that interest and principal payments are made
more frequently, usually monthly, and that principal may be
prepaid at any time because the underlying mortgage loans
generally may be prepaid at any time. As a result, if a Series
purchases these assets at a premium, a faster-than-expected
prepayment rate will reduce yield to maturity, and a slower-than-
expected prepayment rate will have the opposite effect of
increasing yield to maturity. If a Series purchases mortgage-
related securities at a discount, faster-than-expected
prepayments will increase, and slower-than-expected prepayments
will reduce, yield to maturity. Prepayments, and resulting
amounts available for reinvestment by the Series, are likely to
be greater during a period of declining interest rates and, as a
result, are likely to be reinvested at lower interest rates.
Accelerated prepayments on securities purchased at a premium may
result in a loss of principal if the premium has not been fully
amortized at the time of prepayment. Although these securities
will decrease in value as a result of increases in interest rates
generally, they are likely to appreciate less than other fixed-
income securities when interest rates decline because of the risk
of prepayments.
Collateralized Mortgage Obligations (Loomis Sayles Balanced, Back
Bay Advisors Managed, Salomon Brothers Strategic Bond
Opportunities, Back Bay Adviors Bond Income and Salomon Brothers
U.S. Government Series)
A collateralized mortgage obligation (''CMO'') is a security
backed by a portfolio of mortgages or mortgage securities held
under a trust indenture. In some cases, the underlying mortgages
or mortgage securities are issued or guaranteed by the U.S.
Government or an agency or instrumentality thereof, but the
obligations purchased by a Series will in many cases not be so
issued or guaranteed. The issuer's obligation to make interest
and principal payments is secured by the underlying portfolio of
mortgages or mortgage securities. CMOs are issued with a number
of classes or series which have different maturities and which
may represent interests in some or all of the interest or
principal on the underlying collateral or a combination thereof.
In the event of sufficient early prepayments on such mortgages,
the class or series of CMO first to mature generally will be
retired prior to its maturity. The early retirement of a
particular class or series of CMO held by a Series would have the
same effect as the prepayment of mortgages underlying a mortgage
pass-through security.
''Stripped'' Mortgage Securities (Salomon Brothers Strategic Bond
Opportunities and Salomon Brothers U.S. Government Series)
''Stripped'' mortgage securities are issued by agencies or
instrumentalities of the U.S. Government or private issuers.
Stripped mortgage securities are usually structured with two
classes that receive different proportions of the interest and
principal distribution on a pool of mortgage assets. In some
cases, one class will receive all of the interest (the interest-
only or ''IO'' class), while the other class will receive all of
the principal (the principal-only or ''PO'' class). Stripped
mortgage securities have greater market volatility than other
types of mortgage securities. If the underlying mortgage assets
experience greater than anticipated payments of principal, the
Series may fail to recoup fully its investments in IOs. The staff
of the SEC has indicated that it views stripped mortgage
securities as illiquid. Until further clarification of the matter
is provided by the staff, the Series will treat its investment in
stripped mortgage securities as illiquid. As a result, these
investments, together with any other illiquid investments, will
not exceed 15% of a Series' net assets.
Adjustable Rate Mortgage Securities (Loomis Sayles Balanced,
Salomon Brothers Strategic Bond Opportunities and Salomon
Brothers U.S. Government Series)
An adjustable rate mortgage security (''ARM''), like a
traditional mortgage security, is an interest in a pool of
mortgage loans that provides investors with payments consisting
of both principal and interest as mortgage loans in the
underlying mortgage pool are paid off by the borrowers. ARMs have
interest rates that are reset at periodic intervals, usually by
reference to some interest rate index or market interest rate.
Although the rate adjustment feature may act as a buffer to
reduce sharp changes in the value of adjustable rate securities,
these securities are still subject to changes in value based on
changes in market interest rates or changes in the issuer's
creditworthiness. Because the interest rates are reset only
periodically, changes in the interest rate on ARMs may lag
changes in prevailing market interest rates. Also, some ARMs (or
the underlying mortgages) are subject to caps or floors that
limit the maximum change in interest rate during a specified
period or over the life of the security. As a result, changes in
the interest rate on an ARM may not fully reflect changes in
prevailing market interest rates during certain periods. Because
of the resetting of interest rates, ARMs are less likely than non-
adjustable rate securities of comparable quality and maturity to
increase significantly in value when market interest rates fall.
Asset Backed Securities (Loomis Sayles Balanced, Salomon Brothers
Strategic Bond Opportunities and Salomon Brothers U.S. Government
Series)
The securitization techniques used to develop mortgage securities
are also being applied to a broad range of other assets. Through
the use of trusts and special purpose corporations, automobile
and credit card receivables are being securitized in pass-through
structures similar to mortgage pass-through structures or in a
pay-through structure similar to the CMO structure. Generally the
issuers of asset backed bonds, notes or pass-through certificates
are special purpose entities and do not have any significant
assets other than the receivables securing such obligations. In
general, the collateral supporting asset backed securities is of
shorter maturity than mortgage loans. Instruments backed by pools
of receivables are similar to mortgage-backed securities in that
they are subject to unscheduled prepayments of principal prior to
maturity. When the obligations are prepaid, the Series will
ordinarily reinvest the prepaid amounts in securities the yields
of which reflect interest rates prevailing at the time.
Therefore, a Series' ability to maintain a portfolio which
includes high-yielding asset backed securities will be adversely
affected to the extent that prepayments of principal must be
reinvested in securities which have lower yields than the prepaid
obligations. Moreover, prepayments of securities purchased at a
premium could result in a realized loss. A Series will only
invest in asset backed securities rated, at the time of purchase,
AA or better by S&P or Aa or better by Moody's or which, in the
opinion of the subadviser, are of comparable quality.
Inverse Floaters (Loomis Sayles Balanced, Salomon Brothers
Strategic Bond Opportunities and Salomon Brothers U.S. Government
Series)
The Series listed above may invest in inverse floaters, which are
derivative mortgage securities. Inverse floaters are structured
as a class of security that receives distributions on a pool of
mortgage assets and whose yields move in the opposite direction
of short-term interest rates, sometimes, at an accelerated rate.
Inverse floaters may be issued by agencies or instrumentalities
of the U.S. Government, or by private issuers, including savings
and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the
foregoing. Inverse floaters have greater volatility than other
types of mortgage securities in which the Series invest (with the
exception of stripped mortgage securities). Although inverse
floaters are purchased and sold by institutional investors
through several investment banking firms acting as brokers or
dealers, the market for such securities has not yet been fully
developed. Accordingly, inverse floaters are generally illiquid.
Repurchase Agreements (All Series)
In repurchase agreements, a Series buys securities from a seller,
usually a bank or brokerage firm, with the understanding that the
seller will repurchase the securities at a higher price at a
later date. Such transactions afford an opportunity for a Series
to earn a return on available cash at minimal market risk,
although the Series may be subject to various delays and risks of
loss if the seller is unable to meet its obligation to
repurchase.
Reverse Repurchase Agreements and Dollar Roll Agreements (Salomon
Brothers Strategic Bond Opportunities and Salomon Brothers U.S.
Government Series)
The Series may enter into reverse repurchase agreements and
dollar roll agreements with banks and brokers to enhance return.
Reverse repurchase agreements involve sales by the Series of
portfolio assets concurrently with an agreement by the Series to
repurchase the same assets at a later date at a fixed price.
During the reverse repurchase agreement period, the Series
continues to receive principal and interest payments on these
securities and also has the opportunity to earn a return on the
collateral furnished by the counterparties to secure its
obligation to redeliver the securities.
Dollar rolls are transactions in which the Series sells
securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar (same type and
coupon) securities on a specified future date. During the roll
period, the Series forgoes principal and interest paid on both
the securities sold and those to be purchased. The Series is
compensated by the difference between the current sales price and
the forward price for the future purchase (often referred to as
the ''drop'') as well as by the interest earned on the cash
proceeds of the initial sale.
The Series will establish segregated accounts with the Fund's
custodian in which they will maintain cash, U.S. Government
Securities or other liquid high grade debt obligations equal in
value to their obligations with respect to reverse repurchase
agreements and dollar rolls. Reverse repurchase agreements and
dollar rolls involve the risk that the market value of the
securities retained by the Series may decline below the price of
the securities the Series has sold but is obligated to repurchase
under the agreement. In the event the buyer of securities under a
reverse repurchase agreement or dollar roll files for bankruptcy
or becomes insolvent, the Series' use of the proceeds of the
agreement may be restricted pending a determination by the other
party or its trustee or receiver, whether to enforce the Series'
obligation to repurchase the securities. Reverse repurchase
agreements and dollar rolls are not considered borrowings by the
Series for purpose of the Series' fundamental investment
restriction with respect to borrowings.
Options (Draycott International Equity, Venture Value, Salomon
Brothers Strategic Bond Opportunities and Salomon Brothers U.S.
Government Series)
A Series may seek to increase its current return by writing
covered call options and covered put options, with respect to
securities it holds or intends to buy, through the facilities of
options exchanges and directly with market makers in the over-the-
counter market. A Series receives a premium from writing a call
or put option, which increases the Series' current return if the
option expires unexercised or is closed out at a net profit.
At times when a Series has written call options on a substantial
portion of its portfolio, the Series' ability to profit and its
risk of loss from changes in market prices of portfolio
securities will be limited. Appreciation in securities covering
the options would likely be partially or wholly offset by losses
on the options. The termination of options positions under such
conditions would generally result in the realization of short-
term capital losses, which would reduce the Series' current
return. Accordingly, a Series may seek to realize capital gains
to offset realized losses by selling securities.
As described in the Statement, over-the-counter options involve
certain special risks (including liquidity and credit risks) not
necessarily present with exchange-listed options. A Series will
treat as illiquid any over-the-counter options and assets
maintained as ''cover'' for over-the-counter options that the
Series has written.
The options markets of foreign countries are small compared to
those of the United States and consequently are characterized in
most cases by less liquidity than are the U.S. markets. In
addition, foreign markets may be subject to less detailed
reporting requirements and regulatory controls than U.S. markets.
See ''Foreign Securities'' below.
Futures and Other Hedging Transactions (Draycott International
Equity, Venture Value, Westpeak Value Growth, Westpeak Stock
Index, Loomis Sayles Balanced, Back Bay Advisors Managed, Salomon
Brothers Strategic Bond Opportunities and Salomon Brothers U.S.
Government Series)
Futures contracts are exchange-traded obligations to buy or sell
a particular security on a specified future date (or to pay or
receive amounts based on the value of a securities index or
currency on that date).
The use of futures transactions entails certain special risks. In
particular, the variable degree of correlation between price
movements of futures contracts and price movements in the related
securities or currency position of a Series could create the
possibility that losses on the futures contracts are greater than
gains in the value of the Series' position. In addition, futures
markets could be illiquid in some circumstances. As a result, in
certain markets, a Series might not be able to close out a
transaction without incurring substantial losses. Although a
Series' use of futures transactions for hedging should tend to
minimize the risk of loss due to a decline in the value of the
hedged position, at the same time it will tend to limit any
potential gain to a Series that might result from an increase in
value of the position. The daily variation margin requirements
for futures contracts create a greater ongoing potential
financial risk than would purchases of options, in which case the
exposure is limited to the cost of the initial premium.
Each of these Series may, at the discretion of its subadviser,
engage in foreign currency exchange transactions, in connection
with the purchase and sale of portfolio securities, to protect
the value of specific portfolio positions or in anticipation of
changes in relative values of currencies in which current or
future Series' portfolio holdings are denominated or quoted.
For hedging purposes, each of these Series may also buy put or
call options on securities that it holds or intends to buy. In
addition to engaging in options transactions on established
exchanges, a Series may purchase over-the-counter options from
brokerage firms and other financial institutions.
Each of these Series may invest in options and futures contracts
on various securities indices to hedge against changes in the
value of securities it holds or expects to acquire. These Series
may also invest in options on index futures.
No Series will invest more than 5% of its net assets in futures
or premiums for options on futures that are traded on a U.S.
commodities exchange.
Certain asset segregation requirements apply when a Series
becomes obligated under a hedging instrument. There is no
assurance that a Series' hedging strategies will be effective.
These strategies involve costs and the risk of loss to the
Series. See Part II of the Statement for more information.
Swaps (Salomon Brothers Strategic Bond Opportunities Series)
The Series may enter into interest rate, currency and index
swaps. The Series will enter into these transactions primarily to
seek to preserve a return or spread on a particular investment or
portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect
against any increase in the price of securities a Series
anticipates purchasing at a later date. Interest rate swaps
involve the exchange by a Series with another party of their
respective commitments to pay or receive interest (for example,
an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal). A currency swap
is an agreement to exchange cash flows on a notional amount based
on changes in the relative values of the specified currencies.
The Series will maintain cash and appropriate liquid assets in a
segregated custodial account to cover its current obligations
under swap agreements. Because swap agreements are not exchange-
traded, but are private contracts into which the Series and a
swap counterparty enter as principals, the Series may experience
a loss or delay in recovering assets if the counterparty were to
default on its obligations.
Structured Notes (Salomon Brothers Strategic Bond Opportunities
Series)
The Salomon Brothers Strategic Bond Opportunities Series is
permitted to invest in a broad category of instruments known as
''structured notes.'' These instruments are debt obligations
issued by industrial corporations, financial institutions or
governmental or international agencies. Traditional debt
obligations typically obligate the issuer to repay the principal
plus a specified rate of interest. Structured notes, by contrast,
obligate the issuer to pay amounts of principal or interest that
are determined by reference to changes in some external factor or
factors. For example, the issuer's obligations could be
determined by reference to changes in the value of a commodity
(such as gold or oil), a foreign currency, an index of securities
(such as the S&P 500 Index) or an interest rate (such as the U.S.
Treasury bill rate). In some cases, the issuer's obligations are
determined by reference to changes over time in the difference
(or ''spread'') between two or more external factors (such as the
U.S. prime lending rate and the London Inter-Bank Offering Rate).
In some cases, the issuer's obligations may fluctuate inversely
with changes in an external factor or factors (for example, if
the U.S. prime lending rate goes up, the issuer's interest
payment obligations are reduced). In some cases, the issuer's
obligations may be determined by some multiple of the change in
an external factor or factors (for example, three times the
change in the U.S. Treasury bill rate). In some cases, the
issuer's obligations remain fixed (as with a traditional debt
instrument) so long as an external factor or factors do not
change by more than the specified amount (for example, if the
U.S. Treasury bill rate does not exceed some specified maximum);
but if the external factor or factors change by more than the
specified amount, the issuer's obligations may be sharply
increased or reduced.
Structured notes can serve many different purposes in the
management of the Series. For example, they can be used to
increase the Series' exposure to changes in the value of assets
that the Series would not ordinarily purchase directly (such as
gold or oil). They can also be used to hedge the risks associated
with other investments the Series holds. For example, if a
structured note has an interest rate that fluctuates inversely
with general changes in market interest rates, the value of the
structured note would generally move in the opposite direction to
the value of traditional debt obligations, thus moderating the
effect of interest rate changes in the value of the Series'
portfolio as a whole.
Structured notes involve special risks. As with any debt
obligation, structured notes involve the risk that the issuer
will become insolvent or otherwise default on its payment
obligations. The risk is in addition to the risk that the
issuer's obligations (and thus the value of the Series'
investment) will be reduced because of adverse changes in the
external factor or factors to which the obligations are linked.
The value of structured notes will in many cases be more volatile
(that is, will change more rapidly or severely) than the value of
traditional debt instruments. Volatility will be especially high
if the issuer's obligations are determined by reference to some
multiple of the change in the external factor or factors. Many
structured notes have limited or no liquidity, so that the Series
would be unable to dispose of the investment prior to maturity.
(The Series is not permitted to invest more than 15% of its net
assets in illiquid investments.) As with all investments,
successful use of structured notes depends in significant part on
the accuracy of the subadviser's analysis of the issuer's
creditworthiness and financial prospects, and of the subadviser's
forecast as to changes in relevant economic and financial market
conditions and factors. In instances where the issuer of a
structured note is a foreign entity, the usual risks associated
with investments in foreign securities (described below) apply.
Foreign Securities (Loomis Sayles Small Cap, Draycott
International Equity, Alger Equity Growth, Loomis Sayles Avanti
Growth, Venture Value, Loomis Sayles Balanced, Back Bay Advisors
Managed, Salomon Brothers Strategic Bond Opportunities, Back Bay
Advisors Bond Income and Salomon Brothers U.S. Government Series)
Each of these Series may invest in securities of issuers
organized or headquartered outside the United States or primarily
traded outside the United States (''foreign securities''). In the
case of the Loomis Sayles Small Cap, Back Bay Advisors Bond
Income, Loomis Sayles Avanti Growth and Salomon Brothers U.S.
Government Series, the Series will not purchase a foreign
security if, as a result, the Series' holdings of foreign
securities would exceed 20% (10% in the case of the Back Bay
Advisors Bond Income Series) of the Series' total assets.
Although investing in foreign securities may increase a Series'
diversification and reduce portfolio volatility, foreign
securities may present risks not associated with investments in
comparable securities of U.S. issuers. There may be less
information publicly available about a foreign corporate or
government issuer than about a U.S. issuer, and foreign corporate
issuers are not generally subject to accounting, auditing and
financial reporting standards and practices comparable to those
in the United States. The securities of some foreign issuers are
less liquid and at times more volatile than securities of
comparable U.S. issuers. Foreign brokerage commissions and
securities custody costs are often higher than in the United
States. With respect to certain foreign countries, there is a
possibility of governmental expropriation of assets, confiscatory
taxation, political or financial instability and diplomatic
developments that could affect the value of investments in those
countries. A Series' receipt of interest on foreign government
securities may depend on the availability of tax or other
revenues to satisfy the issuer's obligations.
A Series' investments in foreign securities may include
investments in countries whose economies or securities markets
are not yet highly developed. Special considerations associated
with these investments (in addition to the considerations
regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence
on revenues from particular commodities or on international aid
or development assistance, currency transfer restrictions, highly
limited numbers of potential buyers for such securities and
delays and disruptions in securities settlement procedures.
In connection with their investments in foreign securities, the
Series intend to comply with certain diversification guidelines
of the California Department of Insurance. These guidelines
limit each Series' investments in any one foreign country to 20%
of the Series' net assets (except that the limit is 35% with
respect to each of Australia, Canada, France, Japan, the United
Kingdom and Germany). Also, when a Series has at least 20% but
less than 40% of its net assets invested in foreign securities,
it must have investments in at least two foreign countries; when
a Series has at least 40% but less than 60% of its net assets
invested in foreign securities, it must have investments in at
least three foreign countries; when a Series has at least 60% but
less than 80% of its net assets invested in foreign securities,
it must have investments in at least four foreign counties; and
when a Series has more than 80% of its net assets invested in
foreign securities, it must have investments in at least five
foreign countries.
Since most foreign securities are denominated in foreign
currencies or trade primarily in securities markets in which
settlements are made in foreign currencies, the value of these
investments and the net investment income available for
distribution to shareholders of a Series investing in these
securities may be affected favorably or unfavorably by changes in
currency exchange rates or exchange control regulations. Changes
in the value relative to the U.S. dollar of a foreign currency in
which a Series' holdings are denominated will result in a change
in the U.S. dollar value of the Series' assets and the Series'
income available for distribution.
In addition, although part of a Series' income may be received or
realized in foreign currencies, the Series will be required to
compute and distribute its income in U.S. dollars. Therefore, if
the value of a currency relative to the U.S. dollar declines
after a Series' income has been earned in that currency,
translated into U.S. dollars and declared as a dividend, but
before payment of the dividend, the Series could be required to
liquidate portfolio securities to pay the dividend. Similarly, if
the value of a currency relative to the U.S. dollar declines
between the time a Series accrues expenses in U.S. dollars and
the time such expenses are paid, the amount of such currency
required to be converted into U.S. dollars will be greater than
the equivalent amount in such currency of such expenses at the
time they were incurred.
High Yield/High Risk Foreign Sovereign Debt Securities (Salomon
Brothers Strategic Bond Opportunities Series)
Investing in fixed and floating rate high yield foreign sovereign
debt securities will expose the Series to special risks in
addition to those described under ''Foreign Securities'' above.
These bonds are typically issued by developing or emerging
countries, whose ability to pay principal and interest may be
adversely affected by many factors, including: high rates of
inflation, high interest rates, currency exchange rates or
difficulties, political uncertainty or instability, the country's
cash flow position, the availability of sufficient foreign
exchange on the date a payment is due, the relative size of its
debt service burden to the economy as a whole, the policy of the
International Monetary Fund, the World Bank and other
international agencies, the obligor's balance of payments,
including export performance, its access to international credit
and investments, fluctuations in the international prices of
commodities which it imports or exports and the extent of its
foreign reserves and access to foreign exchange. Currency
devaluations may also adversely affect the ability of a sovereign
obligor to obtain sufficient foreign exchange to service its
external debt.
If a foreign sovereign obligor cannot generate sufficient
earnings from foreign trade to service its external debt, it may
need to depend on continuing loans and aid from foreign
governments, commercial banks and multilateral organizations, and
inflows of foreign investment. The commitment on the part of
these entities to make such disbursements may be conditioned on
the government's implementation of economic reforms or other
requirements. Failure to meet such conditions may result in the
cancellation of such third parties' commitments to lend funds,
which may further impair the obligor's ability or willingness to
timely service its debts. Sovereign obligors in developing and
emerging countries have in the past experienced substantial
difficulties in servicing their external debt obligations, which
has led to defaults on certain obligations and the restructuring
of certain indebtedness including among other things, reducing
and rescheduling interest and principal payments by negotiating
new or amended credit agreements or converting outstanding
principal and unpaid interest to Brady Bonds and obtaining new
credit to finance interest payments. There can be no assurance
that the Brady Bonds and other foreign sovereign debt securities
in which the Series may invest will not be subject to similar
restructuring arrangements or to requests for new credit which
may adversely affect the Series' holdings.
Loan Participations and Assignments (Salomon Brothers Strategic
Bond Opportunities Series)
The Series may invest in fixed and floating rate loans
(''Loans'') arranged through private negotiations between a
foreign sovereign entity and one or more financial institutions
(''Lenders''). The Series may invest in such Loans in the form of
participations in Loans (''Participations'') and assignments of
all or a portion of Loans from third parties (''Assignments'').
Participations typically will result in the Series having a
contractual relationship only with the Lender, not with the
borrower. The Series will have the right to receive payments of
principal, interest and any fees to which it is entitled only
from the Lender selling the Participation and only upon receipt
by the Lender of the payments from the borrower. In connection
with purchasing Participations, the Series generally will have no
right to enforce compliance by the borrower with the terms of the
loan agreement relating to the Loan, nor any rights of set-off
against the borrower, and the Series may not benefit directly
from any collateral supporting the Loan in which it has purchased
the Participation. As a result, the Series will be subject to
credit risk relating to both the borrower and the Lender that is
selling the Participation. In the event of the insolvency of the
Lender selling a Participation, the Series may be treated as a
general creditor of the Lender and may not benefit from any set-
off between the Lender and the borrower. When the Series
purchases Assignments from Lenders, the Series will acquire
direct rights against the borrower on the Loan, except that under
certain circumstances such rights may be more limited than those
held by the assigning Lender.
The Series may have difficulty disposing of Assignments and
Participations. Because the market for such instruments is not
highly liquid, the Series anticipates that such instruments could
be sold only to a limited number of institutional investors. The
lack of a highly liquid secondary market may have an adverse
impact on the value of such instruments and will have an adverse
impact on the Series' ability to dispose of particular
Assignments or Participations in response to a specific economic
event, such as deterioration in the creditworthiness of the
borrower. The Series currently intends to treat all investments
in Participations and Assignments as illiquid.
When-Issued Securities (Draycott International Equity, Alger
Equity Growth, Venture Value, Salomon Brothers Strategic Bond
Opportunities and Salomon Brothers U.S. Government Series)
If the value of a ''when-issued'' security being purchased falls
between the time a Series commits to buy it and the payment date,
the Series may sustain a loss. The risk of this loss is in
addition to the Series' risk of loss on the securities actually
in its portfolio at the time. In addition, when the Series buys a
security on a when-issued basis, it is subject to the risk that
market rates of interest will increase before the time the
security is delivered, with the result that the yield on the
security delivered to the Series may be lower than the yield
available on other, comparable securities at the time of
delivery. The Series will maintain cash or liquid high grade
assets in a segregated account in an amount sufficient to satisfy
its outstanding obligations to buy securities on a ''when-
issued'' basis.
Investment Company Securities (Draycott International Equity,
Alger Equity Growth, Capital Growth, Loomis Sayles Avanti Growth,
Venture Value, Westpeak Value Growth, Westpeak Stock Index and
Back Bay Advisors Managed Series)
Each of these Series may invest up to 10% of its assets in
securities of investment companies. Because of restrictions on
direct investment by U.S. entities in certain countries, a Series
may choose to invest indirectly in such countries (by purchasing
shares of another fund that is permitted to invest in such
countries) which may be the most practical or efficient way for
the Series to invest in such countries. In other cases, where
the Series' subadviser desires to make only a relatively small
investment in a particular country, investing through a fund that
holds a diversified portfolio in that country may be more
effective than investing directly in issuers in that country. As
an investor in another investment company, a Series will bear its
share of the expenses of that investment company. These expenses
are in addition to the Series' own costs of operations. In some
cases, investing in an investment company may involve the payment
of a premium over the value of the assets held in that investment
company's portfolio. The Venture Value Series may only invest in
securities of investment companies investing primarily in foreign
securities.
Lending of Portfolio Securities (Alger Equity Growth, Capital
Growth, Venture Value, Westpeak Stock Index, Back Bay Advisors
Managed, Salomon Brothers Strategic Bond Opportunities, Back Bay
Advisors Bond Income and Salomon Brothers U.S. Government Series)
To the extent that any of the above Series lend that Series'
portfolio securities, such lending must be fully collateralized
by cash, letters of credit or U.S. Government Securities at all
times, but involves some credit risk to the Series if the other
party should default on its obligations and the Series is delayed
in or prevented from recovering the collateral.
''Short Sales Against the Box'' (Alger Equity Growth Series)
A short sale is a transaction in which a party borrows a security
and then sells the borrowed security to another party. The Alger
Equity Growth Series may engage in short sales, but only if the
Series owns (or has the right to acquire without further
consideration) the security it has sold short, a practice known
as selling short "against the box." Short sales against the box
may protect the Series against the risk of losses in the value of
its portfolio securities because any unrealized losses with
respect to such securities should be wholly or partially offset
by a corresponding gain in the short position. However, any
potential gains in such securities should be wholly or partially
offset by a corresponding loss in the short position. Short
sales against the box may be used to lock in a profit on a
security when, for tax reasons or otherwise, a subadviser does
not want to sell the security.
Illiquid Securities (All Series)
Each Series may invest up to 15% of its assets (10% in the case
of the Back Bay Advisors Money Market Series) in ''illiquid
securities,'' that is, securities which are not readily
resaleable, including securities whose disposition is restricted
by federal securities laws. The Series may purchase ''Rule 144A
securities.'' These are privately offered securities that can be
resold only to certain qualified institutional buyers. Rule 144A
securities are treated as illiquid, unless the Series' subadviser
has determined, under guidelines established by the Fund's
trustees, that the particular issue of Rule 144A securities is
liquid.
Zero Coupon Securities (Loomis Sayles Balanced, Back Bay Advisors
Managed, Salomon Brothers Strategic Bond Opportunities, Back Bay
Advisors Bond Income and Salomon Brothers U.S. Government Series)
Zero coupon securities involve special risk considerations. Zero
coupon securities are debt securities that pay no cash income but
are sold at substantial discounts from their value at maturity.
When a zero coupon security is held to maturity, its entire
return, which consists of the amortization of discount, comes
from the difference between its purchase price and its maturity
value. The difference is known at the time of purchase, so that
investors holding zero coupon securities until maturity know at
the time of their investment what the return on their investment
will be. Certain zero coupon securities also are sold at
substantial discounts from their maturity value and provide for
the commencement of regular interest payments at a deferred date.
Zero coupon securities tend to be subject to greater price
fluctuations in response to changes in interest rates than are
ordinary interest-paying debt securities with similar maturities.
The value of zero coupon securities appreciates more during
periods of declining interest rates and depreciates more during
periods of rising interest rates. Zero coupon securities may be
issued by a wide variety of corporate and governmental issuers.
Although zero coupon securities are generally not traded on a
national securities exchange, many such securities are widely
traded by brokers and dealers and, if so, will not be considered
illiquid.
Current federal income tax law requires the holder of a zero
coupon security (as well as the holders of other securities, such
as Brady Bonds, which may be acquired at a discount) to accrue
income with respect to these securities prior to the receipt of
cash payments. To maintain its qualification as a regulated
investment company and avoid liability for federal income and
excise taxes, the Series may be required to distribute income
accrued with respect to these securities and may have to dispose
of portfolio securities under disadvantageous circumstances in
order to generate cash to satisfy these distribution
requirements.
Portfolio Turnover
Portfolio turnover is not a limiting factor with respect to
investment decisions for any Series. For example, although the
Capital Growth Series' objective is long-term capital growth, it
frequently sells securities to reflect changes in market,
industry or individual company conditions or outlook, even though
it may only have held those securities for a short period. High
portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne
directly by the relevant Series. For additional information about
such costs see ''Taxes'' and ''Management'' below, and
''Portfolio Transactions and Brokerage'' in the Statement. For
information about the past portfolio turnover rates of all the
Series (other than the Back Bay Advisors Money Market Series),
see "Financial Highlights." Turnover in excess of 100% involves
higher levels of brokerage commissions and possibly increased
realization of taxable gains, as compared to many mutual funds.
Resolving Material Conflicts
Currently, shares in the Fund are available only to separate
accounts established by NEVLICO, The New England or subsidiaries
of The New England as an investment vehicle for variable life
insurance or variable annuity products. In the future, however,
such shares may be offered to separate accounts of insurance
companies unaffiliated with NEVLICO or The New England.
A potential for certain conflicts of interest exists between
the interests of variable life insurance contract owners and
variable annuity contract owners. Pursuant to conditions imposed
in connection with related regulatory relief granted by the SEC,
the Fund's board of trustees (the ''Board of Trustees'') has an
obligation to monitor events to identify conflicts that may arise
from the sale of shares to both variable life insurance and
variable annuity separate accounts or to separate accounts of
insurance companies not affiliated with The New England. Such
events might include changes in state insurance law or federal
income tax law, changes in investment management of any Series of
the Fund, or differences between voting instructions given by
variable life insurance and variable annuity contract owners.
Insurance companies investing in the Fund will be responsible for
proposing and executing any necessary remedial action and the
Board of Trustees has an obligation to determine whether such
proposed action adequately remedies any such conflicts.
PERFORMANCE INFORMATION
Information about the performance of the Series is set forth
below and, from time to time, the Fund may use this information
in advertisements. Performance information about a Series is
based on that Series' past performance and is not intended to
indicate future performance. The Fund serves as the underlying
investment vehicle for variable life insurance or variable
annuity products and its shares cannot be purchased directly.
Therefore, such performance information does not reflect any of
the charges assessed against the insurance company separate
accounts or the variable life insurance or variable annuity
products for which the Fund serves as an investment vehicle.
Where relevant, performance information about those variable life
insurance or variable annuity products is contained in the
prospectus applicable to those products.
Each Series may include its total return in advertisements or
other written material. Total return is measured by comparing the
value of a hypothetical $1,000 investment in the Series at the
beginning of the relevant period to the value of the investment
at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions). Total return reflects
the bearing or deferral of certain expenses by The New England
and its affiliates pursuant to various arrangements that are
described below under ''Management.'' If these arrangements had
not been in effect, each Series' total return would have been
lower.
<PAGE>
<TABLE>
Total Return
Period
Return
1986 1987 1988 1989 1990 1991
<S> <C> <C> <C> <C> <C> <C>
Loomis
Sayles Small _ _ _ _ _ _
Cap
Series(1)
Draycott
Inter- _ _ _ _ _ _
national
Equity
Series
Alger Equity
Growth _ _ _ _ _ _
Series
Capital 95.2% 52.7% -8.8% 30.8% -3.5% 54.0%
Growth
Series
Loomis
Sayles _ _ _ _ _ _
Avanti
Growth
Series(4)
Venture
Value Series _ _ _ _ _ _
Westpeak
Stock Index --- -12.2%(7) 16.3% 30.2% -4.1% 30.4%
Series (6)
Loomis
Sayles _ _ _ _ _ _
Balanced
Series
Back Bay
Advisors _ -0.7%(7) 9.5% 19.1% 3.2% 20.2%
Managed
Series
Salomon
Brothers _ _ _ _ _ _
Strategic
Bond
Opportuni-
ties Series
Back Bay
Advisors 15.8% 1.4% 8.4% 12.3% 8.1% 18.0%
Bond
Income
Series
Salomon
Brothers _ _ _ _ _ _
U.S.
Government
Series
Back Bay
Advisors 6.8% 6.6% 7.4% 9.2% 8.2% 6.2%
Money
Market
Series
S&P 500(8) 18.6% 5.2% 16.5% 31.6% -3.1% 30.3%
Lehman
Intermediate
Government/ 13.1% 3.7% 6.8% 12.8% 9.2% 14.6%
Corporate
Bond
Index(9)
Consumer 1.1% 4.4% 4.4% 4.7% 6.1% 3.1%
Price
Index(10)
Dow Jones
Industrial 27.1% 5.5% 16.1% 32.2% -1.0% 24.2%
Average(11)
<PAGE>
Average
Annual
Average Average Total
Annual Annual Return
Total Total Since
Return Return Commence-
For the For the ment
Ten Five of
Years Years Offering
Period Ending Ending through
Return 1992 1993 1994 1995 12/31/95 12/31/95 12/31/95
<S> <C> <C> <C> <C> <C> <C> <C>
Loomis
Sayles _ _ -3.2%(1) 28.9% -- -- 14.1%(1)
Small
Cap
Series
(1)
Draycott
Internat _ _ 2.6%(2) 6.0% -- -- 8.8%(2)
ional
Equity
Series
Alger
Equity _ _ -4.2%(2) 48.7% -- -- 35.4%(2)
Growth
Series
Capital -6.1% 15.0% -7.1% 38.0% 22.0% 16.4% 23.3%(3)
Growth
Series
Loomis
Sayles _ 14.7%(4) -0.3% 30.4% -- -- 16.2%(4)
Avanti
Growth
Series
(4)
Venture _ _ -3.5%(2) 39.3% -- -- 28.8%(2)
Value
Series
Westpeak
Value _ 14.2%(5) -1.2% 36.5% -- -- 17.6%(5)
Growth
Series
(5)
Westpeak
Stock 7.3% 9.7% 1.1% 36.9% -- 16.3% 12.2%(7)
Index
Series
(6)
Loomis
Sayles _ _ -0.1%(2) 24.8% -- -- 20.3%(2)
Balanced
Series
Back Bay
Advisors 6.7% 10.7% -1.1% 31.3% -- 13.0% 11.0%(7)
Managed
Series
Salomon
Brothers
Strat- _ _ -1.4%(2) 19.4% -- -- 15.0%(2)
egic
Bond
Oppor-
tunities
Series
Back Bay
Advisors 8.2% 12.6% -3.4% 21.2% 10.0% 14.0% 10.9%(3)
Bond
Income
Series
Salomon
Brothers _ _ 0.6%(2) 15.0% -- -- 13.3%(2)
U.S.
Governme
nt
Series
Back Bay
Advisors 3.8% 3.0% 4.0% 5.6% 6.1% 4.5% 6.7%(3)
Money
Market
Series
S&P 7.6% 10.1% 1.3% 37.4% 14.8% 16.5% 15.2%
500(8)
Lehman
Intermed
iate 7.2% 8.8% -2.0% 15.3% 8.8% 8.6% 10.1%
Governme
nt/Corpo
rate
Bond
Index(9)
Consumer 2.9% 2.8% 2.8% 2.6% 3.5% 2.8% 3.5%
Price
Index
(10)
Dow
Jones 7.4% 16.9% 5.1% 37.0% 16.4% 17.6% 16.6%
Indust-
rial
Average
(11)
</TABLE>
(1) For the period beginning May 2, 1994, when the Loomis Sayles
Small Cap Series commenced operations, but did not become
publicly available. Average annual total return for the period
May 2, 1994 through December 31, 1994 is presented on an
unannualized basis.
(2) Represents unannualized total return for the period
beginning October 31, 1994 when the Draycott International
Equity, Alger Equity Growth, Venture Value, Loomis Sayles
Balanced, Salomon Brothers Strategic Bond Opportunities and
Salomon Brothers U.S. Government Series commenced operations.
(3) The Capital Growth Series, Back Bay Advisors Bond Income
Series and Back Bay Advisors Money Market Series commenced
operations on August 26, 1983 and their Average Annual Total
Returns From Commencement of Offering have been calculated for
the period beginning with that date. These returns would not
change if they had been calculated for the period beginning with
September 1, 1983, which is the period for which the Average
Annual Total Returns Since Commencement of Offering have been
calculated for the S&P 500 Stock Index, Lehman Intermediate
Government/Corporate Bond Index, Consumer Price Index and Dow
Jones Industrial Average (unless otherwise indicated).
(4) For the period beginning April 30, 1993, when the Loomis
Sayles Avanti Growth Series became publicly available.
(5) For the period beginning April 30, 1993, when the Westpeak
Value Growth Series became publicly available.
(6) Operations commenced on March 30, 1987, but the Westpeak
Stock Index Series did not become publicly available until May 1,
1987.
(7) For the period beginning May 1, 1987 when the Back Bay
Advisors Managed Series and Westpeak Stock Index Series became
publicly available.
(8) The S&P 500 Stock Index is an unmanaged weighted index of
the stock performance of 500 industrial, transportation, utility
and financial companies. Investment results shown assume the
reinvestment of dividends.
(9) The Lehman Intermediate Government/Corporate Bond Index is a
subset of the Lehman Government/Corporate Bond Index covering all
issues with maturities between 1 and 10 years which is composed
of taxable, publicly-issued, non-convertible debt obligations
issued or guaranteed by the U.S. Government or its agencies and
another Lehman index that is composed of taxable, fixed rate
publicly-issued, investment grade non-convertible corporate debt
obligations.
(10) The Consumer Price Index, published by the U.S. Bureau of
Labor Statistics, is a statistical measure of changes, over time,
in the prices of goods and services.
(11) The Dow Jones Industrial Average is a market value-weighted
and unmanaged index of 30 large industrial stocks traded on the
New York Stock Exchange.
From time to time, articles about a Series regarding
performance, rankings and other Series characteristics may appear
in national publications including, but not limited to, The Wall
Street Journal, Forbes, Fortune, CDA Investment Technologies and
Money Magazine. In particular, some or all of these publications
may publish their own rankings or performance reviews of mutual
funds, including the Fund. References to or reprints or portions
of reprints of such articles, which may include rankings that
list the names of other funds and their performance, may be used
as Fund or variable contract sales literature or advertising
material.
Yield
Back Bay Advisors Money Market Series
The Back Bay Advisors Money Market Series may advertise its
yield and ''effective'' (or ''compound'') yield (and its total
return). The yield of the Back Bay Advisors Money Market Series
is the income earned by the Series over a seven-day period on an
annualized basis, i.e. the income earned in the period is assumed
to be earned every seven days over a 52-week period and is stated
as a percentage of the investment. ''Effective'' (or
''compound'') yield is calculated similarly but, when annualized,
the income earned by the investment is assumed to be reinvested
in the Series' shares and thus compounded in the course of a 52-
week period. The effective yield will be higher than the yield
because of the compounding effect of this assumed reinvestment.
For the seven-day period ended December 31, 1995, the yield for
the Back Bay Advisors Money Market Series was 5.32%. The
effective yield for the same period was 5.46%.
Loomis Sayles Balanced, Salomon Brothers Strategic Bond
Opportunities, Back Bay Advisors Bond Income and Salomon Brothers
U.S. Government Series
Each of these Series may advertise its yield in addition to its
total return. The yield will be computed in accordance with the
SEC's standardized formula by dividing the net investment income
per share earned during a recent 30-day period by the net asset
value of a Series share (reduced by any earned income expected to
be declared shortly as a dividend) on the last trading day of the
period. Yield calculations will reflect any waiver of fees and/or
bearing of expenses by The New England and its affiliates.
INVESTMENT RESTRICTIONS
The following is a description of restrictions on the
investments to be made by the fourteen Series. Except as
specifically listed below, and except for restrictions marked
with an asterisk, these restrictions may not be changed without
the approval of a majority of the outstanding voting securities
of the relevant Series.
Investment Restrictions Applicable to the Capital Growth,
Westpeak Stock Index, Back Bay Advisors Managed, Back Bay
Advisors Bond Income and Back Bay Advisors Money Market Series
Each of the Series listed above will not:
(1) Purchase any securities (other than U.S. Government
Securities) if, as a result, more than 5% of the Series' total
assets (taken at current value) would be invested in securities
of a single issuer; provided, however, that the Westpeak Stock
Index Series and the Back Bay Advisors Managed Series may each
invest more than 5% (but not more than 25%) of its total assets
(taken at current value) in the securities of a single issuer if
securities of any such issuer represent more than 5%,
capitalization weighted, of the stock index that the Series
attempts to track.
(2) Purchase any security (other than U.S. Government
Securities) if, as a result, more than 25% of the Series' total
assets (taken at current value) would be invested in any one
industry. For purposes of this restriction, telephone, gas and
electric public utilities are each regarded as separate
industries and finance companies whose financing activities are
related primarily to the activities of their parent companies are
classified in the industry of their parents. For the purposes of
the Back Bay Advisors Money Market Series and Back Bay Advisors
Managed Series, this restriction does not apply to bank
obligations.
(3) Purchase securities on margin (but it may obtain such
short-term credits as may be necessary for the clearance of
purchases and sales of securities); or make short sales, except
where, by virtue of ownership of other securities, it has the
right to obtain, without payment of further consideration,
securities equivalent in kind and amount to those sold, and no
Series will deposit or pledge more than 10% of its total assets
(taken at current value) as collateral for such sales. (Any
deposit or payment by the Westpeak Stock Index or Back Bay
Advisors Managed Series of initial or maintenance margin in
connection with futures contracts shall not be considered the
purchase of a security on margin for the purposes of this
restriction.)
(4) Acquire more than 10% of the total value of any class of
the outstanding securities of an issuer (taking all preferred
stock issues of an issuer as a single class and debt issues of an
issuer as a single class) or acquire more than 10% of the
outstanding voting securities of an issuer.
(5) Borrow money, except as a temporary measure for
extraordinary or emergency purposes (but not for the purpose of
investment) up to an amount not in excess of 10% of its total
assets (taken at cost), or 5% of its total assets (taken at
current value), whichever is lower; provided, however, that the
Back Bay Advisors Bond Income Series, the Capital Growth Series
and the Back Bay Advisors Managed Series may loan their portfolio
securities. (See ''Loans of Portfolio Securities'' above.)
(6) Invest more than 5% of its total assets (taken at
current value) in securities of businesses (including
predecessors) less than three years old.
(7) Purchase or retain securities of any issuer if, to the
knowledge of the Fund, officers and trustees of the Fund or
officers and directors of any investment adviser of the Fund who
individually own beneficially more than 1/2 of 1% of the
securities of that company, together own beneficially more than
5%.
(8) Act as underwriter except to the extent that, in
connection with the disposition of portfolio securities, it may
be deemed to be an underwriter under the federal securities laws;
or purchase any security restricted as to disposition under the
federal securities laws; provided, however, that, subject to the
Fund's limitation on illiquid investments stated below, each of
the Back Bay Advisors Bond Income, Capital Growth and Back Bay
Advisors Managed Series may invest up to 10% of its total assets
(taken at current value) in such restricted securities.
(9) Make investments for the purpose of exercising control
or management.
(10) Participate on a joint or joint and several basis in
any trading account in securities. (The ''bunching'' of orders
for the purchase or sale of portfolio securities with The New
England, Back Bay Advisors, Capital Growth Management Limited
Partnership, Westpeak or accounts under their management to
reduce acquisition costs, to average prices among such accounts
to facilitate such transactions, is not considered participating
in a trading account in securities.)
(11) Invest in the securities of other investment companies,
except in connection with a merger, consolidation or similar
transaction, and except that the Back Bay Advisors Bond Income
Series, the Capital Growth Series, the Westpeak Stock Index
Series and the Back Bay Advisors Managed Series may invest in
securities of other investment companies by purchases in the open
market involving only customary broker's commissions. (Under the
Investment Company Act of 1940 (the ''1940 Act'') each Series
generally may not (a) invest more than 10% of its total assets
(taken at current value) in the securities of other investment
companies, (b) own securities of any one investment company
having a value in excess of 5% of that Series' total assets
(taken at current value), or (c) own more than 3% of the
outstanding voting stock of any one investment company.)
(12) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts, commodities or commodity contracts (except
that each of the Westpeak Stock Index Series and the Back Bay
Advisors Managed Series may buy or sell futures contracts on
stock indexes and the Back Bay Advisors Managed Series may buy or
sell interest rate futures contracts) or real estate. This
restriction does not prevent any Series from purchasing
securities of companies investing in real estate or of companies
which are not principally engaged in the business of buying or
selling such leases, rights or contracts.
(13) Pledge, mortgage or hypothecate more than 15% of its
total assets (taken at cost).
Restrictions (1) and (2) apply to securities subject to
repurchase agreements but not to the repurchase agreements
themselves.
Each of the Series listed above will not purchase any illiquid
security if, as a result, more than 15% (10% in the case of the
Back Bay Advisors Money Market Series) of its net assets (taken
at current value) would be invested in such securities.
Investment Restrictions Applicable to Individual Series
In addition to the foregoing investment restrictions, the
following investment restrictions are applicable to individual
Series as noted below.
Back Bay Advisors Money Market Series
The Back Bay Advisors Money Market Series will not:
(1) Make loans, except by purchase of debt obligations in
which the Back Bay Advisors Money Market Series may invest
consistent with its objective and investment policies. This
restriction does not apply to repurchase agreements.
(2) Write or purchase puts, calls or combinations thereof.
Back Bay Advisors Bond Income Series
The Back Bay Advisors Bond Income Series will not:
(1) Make loans, except by purchase of bonds, debentures,
commercial paper, corporate notes and similar evidences of
indebtedness, which are part of an issue to the public or to
financial institutions, by entering into repurchase agreements or
by lending portfolio securities to the extent set forth above
under ''Loans of Portfolio Securities'' above.
(2) Write or purchase puts, calls or a combination thereof
except that the Back Bay Advisors Bond Income Series may purchase
warrants or other rights to subscribe to securities of companies
issuing such warrants or rights, or of parents or subsidiaries of
such companies, provided that such warrants or other rights to
subscribe are attached to, or a part of, a unit offering
involving other securities.
In order to comply with certain state requirements applicable
to restriction (13) above, as a matter of operating policy
subject to change without shareholder approval, the Back Bay
Advisors Bond Income Series will not pledge more than 2% of its
assets.
Capital Growth Series; Westpeak Stock Index Series
Neither the Capital Growth Series nor the Westpeak Stock Index
Series will:
(1) Make loans, except by purchase of bonds, debentures,
commercial paper, corporate notes, and similar evidences of
indebtedness, which are a part of an issue to the public or to
financial institutions, by entering into repurchase agreements or
by lending portfolio securities to the extent set forth under
''Loans of Portfolio Securities'' above.
(2) Purchase options or warrants if, as a result, more than
1% of its total assets (taken at current value) would be invested
in such securities.
(3) Write options or warrants.
As a matter of operating policy subject to change without
shareholder approval, the Capital Growth Series will not make
loans of its portfolio securities. In order to comply with
certain state requirements applicable to restriction (13) above,
as a matter of operating policy subject to change without
shareholder approval, neither the Capital Growth Series nor the
Westpeak Stock Index Series will pledge more than 2% of its
assets.
Back Bay Advisors Managed Series
The Back Bay Advisors Managed Series will not:
(1) Make loans, except by purchase of bonds, debentures,
commercial paper, corporate notes and similar evidences of
indebtedness, which are a part of an issue to the public or to
financial institutions, by entering into repurchase agreements,
or by lending portfolio securities to the extent set forth under
''Loans of Portfolio Securities'' above.
(2) Purchase options or warrants if, as a result, more than
1% of its total assets (taken at current value) would be invested
in such securities; provided, however, that the Back Bay Advisors
Managed Series may, without regard to the foregoing percentage
limit, purchase warrants or other rights to subscribe to
securities of companies issuing such warrants or rights, or of
parents or subsidiaries of such companies, provided that such
warrants or other rights to subscribe are attached to, or a part
of a unit offering involving, other securities.
In order to comply with certain state requirements applicable
to restriction (13) above, as a matter of operating policy
subject to change without shareholder approval, the Back Bay
Advisors Managed Series will not pledge more than 2% of its
assets.
Investment Restrictions Applicable to the Loomis Sayles Small
Cap, Draycott International Equity, Alger Equity Growth, Loomis
Sayles Avanti Growth, Venture Value, Westpeak Value Growth,
Loomis Sayles Balanced, Salomon Brothers Strategic Bond
Opportunities and Salomon Brothers U.S. Government Series
Each of the Series listed above will not:
*(1) With respect to 75% of the Series' total assets,
purchase any security (other than U.S. Government obligations)
if, as a result, more than 5% of the Series' total assets (taken
at current value) would then be invested in securities of a
single issuer and, with respect to the Series' total assets,
purchase any security (other than U.S. Government obligations)
if, as a result, more than 10% of such assets would then be
invested in securities of a single issuer;
(2) Purchase any security (other than U.S. Government
Securities) if, as a result, more than 25% of the Series' total
assets (taken at current value) would be invested in any one
industry (in the utilities category, gas, electric, water and
telephone companies will be considered as being in separate
industries, and each foreign country's government (together with
subdivisions thereof) will be considered to be a separate
industry);
*(3) Purchase securities on margin (but it may obtain such
short-term credits as may be necessary for the clearance of
purchases and sales of securities), or make short sales except
where, by virtue of ownership of other securities, it has the
right to obtain, without payment of further consideration,
securities equivalent in kind and amount to those sold, and the
Series will not deposit or pledge more than 10% of its total
assets (taken at current value) as collateral for such sales.
(For this purpose, the deposit or payment by the Series of
initial or variation margin in connection with futures contracts
or related options transactions is not considered the purchase of
a security on margin);
*(4) Acquire more than 10% of any class of securities of an
issuer (taking all preferred stock issues of an issuer as a
single class and all debt issues of an issuer as a single class)
or acquire more than 10% of the outstanding voting securities of
an issuer;
(5) Borrow money in excess of 10% of its total assets (taken
at cost) or 5% of its total assets (taken at current value),
whichever is lower, and then only as a temporary measure for
extraordinary or emergency purposes;
*(6) Pledge more than 15% of its total assets (taken at
cost). (For the purpose of this restriction, collateral
arrangements with respect to options, futures contracts and
options on futures contracts and with respect to initial and
variation margin are not deemed to be a pledge of assets);
*(7) Invest more than 5% of its total assets (taken at
current value) in securities of businesses (including
predecessors) less than three years old;
*(8) Purchase or retain securities of any issuer if officers
and trustees of the Fund or officers and directors of any
investment adviser of the Fund who individually own more than 1/2
of 1% of the shares or securities of that issuer, together own
more than 5%;
(9) Make loans, except by entering into repurchase
agreements (including reverse repurchase agreements) or by
purchase of bonds, debentures, commercial paper, corporate notes
and similar evidences of indebtedness, which are a part of an
issue to the public or to financial institutions, or through the
lending of the Series' portfolio securities to the extent set
forth under ''Loans of Portfolio Securities'' above;
(10) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts, real estate or commodities or commodity
contracts, except that the Series may buy and sell futures
contracts and related options. (This restriction does not prevent
the Series from purchasing securities of companies investing in
the foregoing);
(11) Act as underwriter, except to the extent that, in
connection with the disposition of portfolio securities, it may
be deemed to be an underwriter under certain federal securities
laws;
*(12) Make investments for the purpose of exercising control
or management;
*(13) Participate on a joint or joint and several basis in
any trading account in securities. (The ''bunching'' of orders
for the purchase or sale of portfolio securities for a Series
with that Series' adviser or subadviser or accounts under their
management to reduce brokerage commissions, to average prices
among them or to facilitate such transactions is not considered a
trading account in securities for purposes of this restriction.);
*(14) Write, purchase or sell options or warrants or, in the
case of the Loomis Sayles Small Cap Series, combinations of both,
except that the Series may (a) acquire warrants or rights to
subscribe to securities of companies issuing such warrants or
rights, or of parents or subsidiaries of such companies, (b)
write, purchase and sell put and call options on securities or
securities indices, and (c) enter into currency forward
contracts;
*(15) Purchase any illiquid security if, as a result, more
than 15% of its net assets (taken at current value) would be
invested in such securities;
*(16) Invest in the securities of other investment
companies, except by purchases in the open market involving only
customary brokers' commissions. Under the 1940 Act, the Series
may not (a) invest more than 10% of its total assets (taken at
current value) in such securities, (b) own securities of any one
investment company having a value in excess of 5% of the total
assets of the Series (taken at current value), or (c) own more
than 3% of the outstanding voting stock of any one investment
company; or
(17) Issue senior securities. (For the purpose of this
restriction none of the following is deemed to be a senior
security: any pledge or other encumbrance of assets permitted by
restriction (6) above; any borrowing 'permitted by restriction
(5) above; any collateral arrangements with respect to options,
futures contracts and options on futures contracts and with
respect to initial and variation margin; the purchase or sale of
options, forward contracts, futures contracts or options on
futures contracts; and the issuance of shares of beneficial
interest permitted from time to time by the provisions of the
Trust's Declaration of Trust and by the 1940 Act, the rules
thereunder, or any exemption therefrom.)
For purposes of restriction (5), reverse repurchase agreements
are not considered borrowings.
Variable Contract Related Investment Restrictions
Separate accounts supporting variable life insurance and
variable annuity contracts are subject to certain diversification
requirements imposed by regulations adopted under the Internal
Revenue Code. Because the Fund is intended as an investment
vehicle for variable life insurance and variable annuity separate
accounts, Section 817(h) of the Internal Revenue Code requires
that the Fund's investments, and accordingly the investments of
each Series, be ''adequately diversified'' in accordance with
Treasury Regulations. Failure to do so means the variable life
insurance and variable annuity contracts would cease to qualify
as life insurance and annuities for federal tax purposes.
Regulations specifying the diversification requirements have been
issued by the Department of Treasury. The Fund intends to comply
with these requirements.
MANAGEMENT
The Fund's Board of Trustees supervises the affairs of the Fund
as conducted by the Series' advisers and subadvisers. Pursuant to
separate advisory agreements, and subject in each case to the
supervision of the Fund's Board of Trustees, TNE Advisers, Inc.
is the investment adviser of each of the Series except the
Capital Growth Series, for which CGM serves as adviser.
Series Advised by TNE Advisers, Inc.
With respect to each of the thirteen Series for which TNE
Advisers, Inc. serves as adviser, TNE Advisers, Inc. has sub-
contracted day-to-day portfolio management responsibility to a
sub-adviser as follows:
Series Subadviser
Loomis Sayles Small Cap Series Loomis, Sayles &
Company, L.P.
Draycott International Equity Draycott Partners, Ltd.
Series
Alger Equity Growth Series Fred Alger Management,
Inc.
Loomis Sayles Avanti Growth Series Loomis, Sayles &
Company, L.P.
Venture Value Series Davis Selected
Advisers, L.P.
Westpeak Value Growth Series Westpeak Investment
Advisors, L.P.
Westpeak Stock Index Series Westpeak Investment
Advisors, L.P.
Loomis Sayles Balanced Series Loomis, Sayles &
Company, L.P.
Back Bay Advisors Managed Series Back Bay Advisors, L.P.
Salomon Brothers Strategic Bond Salomon Brothers Asset
Opportunities Series Management Inc
Back Bay Advisors Bond Income Back Bay Advisors, L.P.
Series
Salomon Brothers U.S. Government Salomon Brothers Asset
Series Management Inc
Back Bay Advisors Money Market Back Bay Advisors, L.P.
Series
TNE Advisers, Inc., 501 Boylston Street, Boston, Massachusetts
02116, was organized in 1994. It is a wholly-owned subsidiary of
The New England. TNE Advisers, Inc. oversees, evaluates and
monitors the subadvisers' provision of investment advisory
services to the Series and provides general business management
and administration to the Series. TNE Advisers, Inc. has
contracted with New England Funds L.P. to provide certain
administrative services to support the Series.
Subject to the supervision of TNE Advisers, Inc., each
subadviser manages its Series in accordance with the Series'
investment objective and policies, makes investment decisions for
that Series, places orders to purchase and sell securities for
that Series and employs professional advisers and securities
analysts who provide research services to that Series. The Series
advised by TNE Advisers, Inc. pay no direct fees to any of the
subadvisers described below.
TNE Advisers, investment adviser to each Series of the Fund
except the Capital Growth Series, is a wholly-owned subsidiary of
The New England. Loomis Sayles, Westpeak and Back Bay Advisors
are each independently operated subsidiaries, and CGM is an
independently operated affiliate, of New England Investment
Companies, L.P. (''NEIC''). The general partners of each of
Loomis Sayles, Westpeak and Back Bay Advisors are special purpose
corporations which are indirect wholly-owned subsidiaries of
NEIC. NEIC's sole general partner, New England Investment
Companies, Inc., is a wholly-owned subsidiary of The New England,
which also owns a majority of the limited partnership interest in
NEIC. NEIC is the owner of a majority limited partnership
interest in the Capital Growth Series' investment adviser, CGM.
Consequently, the subadvisers (Loomis Sayles, Westpeak and Back
Bay Advisors) of eight Series of the Fund are currently wholly-
owned subsidiaries of NEIC and an additional Series is advised by
a majority-owned subsidiary (CGM) of NEIC. The subadvisers of
the remaining five Series offered through this prospectus are not
affiliated with The New England or NEIC.
The New England and Metropolitan Life Insurance Company
("MetLife") have entered into an agreement to merge, with MetLife
to be the survivor of the merger. The merger is conditioned
upon, among other things, receipt of certain regulatory
approvals.
The merger of The New England into MetLife is being treated,
for purposes of the Investment Company Act of 1940 (the "Act"),
as an "assignment" of the existing advisory agreements for each
Series and of the subadvisory agreements of the eight Series that
have NEIC subsidiaries as subadvisers. Under the Act, such an
"assignment" will result in an automatic termination of these
agreements. The subadvisory agreements for the other Series
terminate automatically, by their terms, upon any termination of
TNE Advisers' advisory agreement with the Fund. Thus, those
subadvisory agreements will also terminate at the time of the
merger. Shareholders of the Series have approved new investment
advisory and subadvisory agreements, intended to take effect at
the time of the merger. The new agreements are substantially
identical to the existing agreements.
Loomis Sayles, One Financial Center, Boston, MA 02111,
subadviser to the Loomis Sayles Avanti Growth, Loomis Sayles
Small Cap and Loomis Sayles Balanced Series, was founded in 1926
and is one of the country's oldest and largest investment firms.
Richard W. Hurckes, Vice President of Loomis Sayles and Vice
President of the Fund, and Scott Pape, Vice President of Loomis
Sayles and Vice President of the Fund, have served as the
portfolio managers of the Loomis Sayles Avanti Growth Series
since its inception in 1993. Mr. Hurckes has been employed by
Loomis Sayles for more than five years. Prior to the time he
joined Loomis Sayles in 1991, Mr. Pape was Equity Portfolio
Manager of the Illinois State Board of Investment.
Jeffrey C. Petherick, Vice President of Loomis Sayles and the
Fund, and Mary Champagne, Vice President of Loomis Sayles and the
Fund, have day-to-day management responsibility for the Small Cap
Series. Mr. Petherick has co-managed the Series since its
inception and has been employed by Loomis Sayles for more than
five years. Ms. Champagne has co-managed the Series since July
1995. Prior to joining Loomis Sayles in 1993, Ms. Champagne
served as a portfolio manager at NBD Bank for 10 years.
Douglas D. Ramos and Meri Anne Beck, who are Vice Presidents of
the Fund and Loomis Sayles, serve as portfolio managers for the
Loomis Sayles Balanced Series. Both Mr. Ramos and Ms. Beck have
been employed by Loomis Sayles for more than five years.
Westpeak, 1011 Walnut Street, Boulder, CO 80302, subadviser to
the Westpeak Value Growth and Westpeak Stock Index Series, was
organized in 1991. Gerald H. Scriver, President and Chief
Executive Officer of Westpeak and Senior Vice President of the
Fund, and Philip J. Cooper, CFA, Senior Vice President of
portfolio management of Westpeak and Vice President of the Fund,
have served as the portfolio managers of the Westpeak Value
Growth Series since its inception in 1993 and as the portfolio
managers of the Westpeak Stock Index Series since August 1, 1993.
Both Mr. Scriver and Mr. Cooper have been with Westpeak since its
inception in 1991. Prior to joining Westpeak in 1991, Mr. Scriver
was Director of Quantitative Strategies of INVESCO and Mr. Cooper
was Portfolio Manager of United Asset Management Services.
Back Bay Advisors, 399 Boylston Street, Boston, Massachusetts
02116, subadviser to the Back Bay Advisors Money Market, Back Bay
Advisors Bond Income and Back Bay Advisors Managed Series,
provides discretionary investment management services to mutual
funds and other institutional investors. The New England itself
served as adviser to the Back Bay Advisors Money Market Series
and the Back Bay Advisors Bond Income Series until September 10,
1986, when it transferred these advisory functions to Back Bay
Advisors, incident to a reorganization effected in order to
maintain The New England's investment advisory activities in a
separate corporate entity for administrative and regulatory
purposes. Catherine L. Bunting, Senior Vice President of Back Bay
Advisors and Vice President of the Fund, has served as the Back
Bay Advisors Bond Income Series' portfolio manager since January
1989. Peter Palfrey, Vice President of Back Bay Advisors and Vice
President of the Fund, has served as the Back Bay Advisors
Managed Series' portfolio manager since January 1994. Ms. Bunting
has been employed by Back Bay Advisors for more than five years.
Mr. Palfrey, prior to joining Back Bay Advisors in 1993, was
Investment Vice President with Mutual of New York.
Draycott Partners, Ltd. (''Draycott''), 8 City Road, London
EC2Y 1HE, England subadvises the Draycott International Equity
Series. Draycott was organized in 1991 to provide investment
advice and management services to institutional investors'
accounts and to mutual funds distributed both to institutional
and retail customers. Draycott is regulated by the Investment
Management Regulatory Organisation Limited (''IMRO'') in the
conduct of Investment Business and is registered as an investment
adviser in the United States pursuant to the Investment Advisers
Act of 1940. IMRO is the United Kingdom regulator of investment
advisers. In addition to the Series, Draycott currently manages
two other mutual funds and a separate investment account of The
New England that invest substantially all of their assets in
international equity securities. Nicholas D.P. Carn, Chief
Investment Officer, President and Chief Executive Officer of
Draycott, Timothy S. Griffen, Senior Portfolio Manager and
Pacific Rim Specialist of Draycott, Gregory D. Eckersley,
Portfolio Manager and United Kingdom Specialist of Draycott, and
Nigel Hankin, Portfolio Manager and European Specialist of
Draycott, serves as the portfolio managers of the Draycott
International Equity Series. Prior to Draycott's organization in
1991, Mr. Carn was Managing Director, International Equities
Group, Mr. Griffen was a Vice President and Portfolio Manager and
Mr. Hankin was European Fund Manager, all at CIGNA International
Investment Advisors, Ltd. and Mr. Eckersley was an Investment
Manager at Century Asset Management, London.
Draycott is a subsidiary of Cursitor Holdings, Limited
("Cursitor"). Cursitor, headquartered at 66 Buckingham Gate,
London, England SW1E 6AU, is an international investment
management group that had approximately $10 billion in assets
under management at December 31, 1995. Alliance Capital
Management L.P. ("Alliance Capital") is expected to acquire the
business of Cursitor in 1996. As a result of this transaction,
Draycott will become a wholly-owned subsidiary of a new entity,
Cursitor Alliance LLC, in which Alliance Capital will directly
and indirectly own a 93% interest. Alliance Capital Management
Corporation ("ACMC") is the sole general partner of, and the
owner of a 1% general partnership interest in, Alliance Capital.
ACMC is an indirectly wholly-owned subsidiary of The Equitable
Life Assurance Socity of the United States, which is a wholly-
owned subsidiary of The Equitable Companies Incorporated, a
holding company controlled by AXA, a French insurance holding
company.
Alger Management, 75 Maiden Lane, New York, New York 10038,
subadvises the Alger Equity Growth Series. Alger Management is a
wholly-owned subsidiary of Fred Alger & Company, Incorporated,
which in turn is a wholly-owned subsidiary of Alger Associates,
Inc., a financial services holding company. Fred M. Alger III and
his brother, David D. Alger, are the majority shareholders of
Alger Associates, Inc. and may be deemed to control that company
and its subsidiaries. David D. Alger, Seilai Khoo and Ron
Tartaro are primarily responsible for the day-to-day management
of the Alger Equity Growth Series. David D. Alger has been
employed by Alger Management as Executive Vice President and
Director of Research since 1971, as President since 1995 and he
serves as portfolio manager for other mutual funds and investment
accounts managed by Alger Management. Ms. Khoo has been employed
by Alger Management since 1989 and as a Senior Vice President
since 1995. Mr. Tartaro has been employed by Alger Management
since 1990 and as a Senior Vice President since 1995.
Davis Selected, 124 East Marcy Street, Santa Fe, New Mexico
87501, subadvises the Venture Value Series. Venture Advisers,
Inc., is the sole general partner of Davis Selected, which is
controlled by Shelby M. C. Davis. Davis Selected provides
advisory services to other investment companies and institutions.
Since 1968, Mr. Davis, who is co-manager of the Series, has been
a director of Venture Advisers, Inc. He is also a director and
officer of all investment companies managed by Davis Selected.
Christopher C. Davis has co-managed the Venture Value Series
since October, 1995. He has been employed by Davis Selected as
an assistant portfolio manager and research analyst since 1989.
Salomon Brothers Asset Management Inc (''SBAM''), 7 World Trade
Center, New York, New York 10048, the subadviser to the Salomon
Brothers U.S. Government Series and the Salomon Brothers
Strategic Bond Opportunities Series, is an indirect, wholly-owned
subsidiary of Salomon Inc (''SI'') and was incorporated in 1987.
In connection with SBAM's service as subadviser to the
Strategic Bond Opportunities Series, SBAM's London based
affiliate, Salomon Brothers Asset Management Limited (''SBAM
Limited''), Victoria Plaza, 111 Buckingham Palace Road, London
SW1W, OSB, England, serves as subadviser to SBAM relating to
currency transactions and investments in non-dollar denominated
debt securities for the benefit of the Salomon Brothers Strategic
Bond Opportunities Series. For these services, SBAM has agreed to
compensate SBAM Limited at the rate of one-third of the
compensation payable to SBAM by TNE Advisers, Inc. SBAM Limited
is an indirect, wholly-owned subsidiary of SI. SBAM Limited is a
member of IMRO and is registered as an investment adviser in the
United States pursuant to the Investment Advisers Act of 1940.
Steven Guterman is primarily responsible for the day-to-day
management of the Salomon Brothers U.S. Government Series and the
mortgage-backed securities and U.S. Government securities
portions of the Salomon Brothers Strategic Bond Opportunities
Series. Mr. Guterman co-manages the Salomon Brothers U.S.
Government Series with Roger Lavan. Peter J. Wilby is primarily
responsible for the day-to-day management of the High Yield and
Emerging Market Debt Securities portions of the Salomon Brothers
Strategic Bond Opportunities Series. Beth Semmel assists Mr.
Wilby in the day-to-day management of the Strategic Bond
Opportunities Series. David Scott is primarily responsible for
the portion of the Salomon Brothers Strategic Bond Opportunities
Series relating to currency transactions and investments in non-
dollar denominated debt securities.
Mr. Guterman joined SBAM in 1990 and is currently a Managing
Director and Senior Portfolio Manager. He initially worked in the
mortgage research group where he became a Research Director and
later traded derivative mortgage-backed securities for Salomon
Brothers Inc. Mr. Guterman joined Salomon Brothers Inc in 1983.
Mr. Lavan joined SBAM in 1990 and is a Director and Portfolio
Manager. Prior to joining SBAM, Mr. Lavan spent four years
analyzing portfolios for Salomon Brothers Inc.'s Fixed Income
Sales Group and Product Support Divisions. Mr. Wilby joined SBAM
in 1989. Ms. Semmel joined SBAM in May of 1993 and is a Director
and Portfolio Manager. Prior to joining SBAM, Ms. Semmel spent
four years as a high yield bond analyst at Morgan Stanley Asset
Management. Mr. Scott has been with SBAM Limited since April,
1994 and is a Director and Portfolio Manager. Previously, he was
a portfolio manager for J.P. Morgan Investment Management in
London from 1990-94 where he was responsible for global and non-
dollar portfolios. Before joining J.P. Morgan, Mr. Scott was
employed by Mercury Asset Management where he had responsibility
for captive insurance portfolios and products.
Fees and Expenses. TNE Advisers, Inc. is paid a management fee
from the Series it manages as follows:
Management fee paid by Series to
TNE Advisers, Inc.
Series (% of average net assets)
[S] [C]
Loomis Sayles Small Cap Series 1.00% all assets
Draycott International Equity 0.90% all assets
Series
Alger Equity Growth Series 0.75% all assets
Loomis Sayles Avanti Growth 0.70% the first $200 million
Series
0.65% the next $300 million
0.60% amounts in excess of $500
million
Venture Value Series 0.75% all assets
Westpeak Value Growth Series 0.70% the first $200 million
0.65% the next $300 million
0.60% amounts in excess of $500
million
Westpeak Stock Index Series 0.25% all assets
Loomis Sayles Balanced Series 0.70% all assets
Back Bay Advisors Managed 0.50% all assets
Series
Salomon Brothers Strategic Bond 0.65% all assets
Opportunities Series
Back Bay Advisors Bond Income 0.40% the first $400 million
Series
0.35% the next $300 million
0.30% the next $300 million
0.25% amounts in excess of $1 billion
Salomon Brothers U.S. 0.55% all assets
Government Series
Back Bay Advisors Money Market 0.35% the first $500 million
Series
0.30% the next $500 million
0.25% amounts in excess of $1 billion
Sub-Advisory Fees. TNE Advisers pays each sub-adviser at the
following rates for providing sub-advisory services to the
following Series:
<TABLE>
Series Annual Percentage Average Daily Net Asset
Rates Paid Value Levels
by TNE
Advisers to the
Respective
Sub-Advisers
<S> <C> <C>
Loomis Sayles Small Cap 0.55% of the first $25 million
Series
0.50% of the next $75 million
0.45% of the next $100 million
0.40% of amounts in excess of
$200 million
Draycott International 0.75% of the first $10 million
Equity Series
0.60% of the next $40 million
0.45% of amounts in excess of
$50 million
Alger Equity Growth 0.45% of the first $100
Series million
0.40% of the next $400 million
0.35% of amounts in excess of
$500 million
Loomis Sayles Avanti 0.50% of the first $25 million
Growth
Series 0.40% of the next $75 million
0.35% of the next $100 million
0.30% of amounts in excess of
$200 million
Venture Value Series 0.45% of the first $100
million
0.40% of the next $400 million
0.35% of amounts in excess of
$500 million
Westpeak Value Growth 0.50% of the first $25 million
Series
0.40% of the next $75 million
0.35% of the next $100 million
0.30% of amounts in excess of
$200 million
Westpeak Stock Index 0.10% of all assets
Series
Loomis Sayles Balanced 0.50% of the first $25 million
Series
0.40% of the next $75 million
0.30% of amounts in excess of
$100 million
Back Bay Advisors 0.25% of the first $50 million
Managed Series
0.20% of amounts in excess of
$50 million
Salomon Brothers 0.35% of the first $50 million
Strategic Bond
Opportunities Series 0.30% of the next $150 million
0.25% of the next $300 million
0.20% of amounts in excess of
$500 million
Back Bay Advisers Bond 0.25% of the first $50 million
Income Series
0.20% of the next $200 million
0.15% of amounts in excess of
$250 million
Salomon Brothers U.S. 0.225% of the first $200
Government Series million
0.150% of the next $300 million
0.100% of amounts in excess of
$500 million
Back Bay Advisors Money 0.15% of the first $100
Market Series million
0.10% of amounts in excess of
$100 million
</TABLE>
Adviser of the Capital Growth Series
CGM, One International Place, Boston, MA 02110, adviser to the
Capital Growth Series, is an investment advisory firm organized
in 1989 which manages seven mutual fund portfolios and advisory
accounts for other clients. The sole general partner of CGM is a
corporation owned in equal shares by Robert L. Kemp and G.
Kenneth Heebner, who are officers of the Fund. Mr. Heebner,
Senior Portfolio Manager of CGM and Senior Vice President of the
Fund, has served as portfolio manager of the Capital Growth
Series since August of 1983. Until 1990, Mr. Heebner was an
officer and employee of Loomis Sayles, which served as adviser to
the Capital Growth Series through February of that year.
The Capital Growth Series pays its adviser, CGM, a management
fee at an annual rate of 0.70% of the first $200 million of
average net assets, 0.65% of the next $300 million of such assets
and 0.60% of such assets in excess of $500 million. For advisory
services rendered during the fiscal year ended December 31, 1995,
CGM was paid 0.64% of the Capital Growth Series' average net
assets.
Voluntary Expense Agreement
Pursuant to a voluntary expense agreement relating to the Loomis
Sayles Avanti Growth, Westpeak Value Growth, Westpeak Stock
Index, Back Bay Advisors Managed, Back Bay Advisors Bond Income
and Back Bay Advisors Money Market Series, TNE Advisers, Inc.
bears the expenses (other than the advisory fees and any
brokerage costs, interest, taxes or extraordinary expenses) of
the Series in excess of 0.15% of the respective Series' average
daily net assets. In the case of the Loomis Sayles Small Cap
Series, TNE Advisers Inc. bears all the expenses (other than any
brokerage costs, interest, taxes or extraordinary expenses) of
the Series in excess of 1.00% of the Series' average daily net
assets. Similar voluntary expense agreements with The New England
have been in effect with respect to the Capital Growth Series
from November 1, 1994 to April 30, 1996 and were in effect with
respect to the Back Bay Advisors Money Market, Back Bay Advisors
Bond Income, Back Advisors Managed and Westpeak Stock Index
Series from November 1, 1994 through April 30, 1995 and with
respect to the Loomis Sayles Small Cap, Loomis Sayles Avanti
Growth and Westpeak Value Growth Series from December 1, 1994
through April 30, 1995. As a result of the current voluntary
expense agreements (and assuming the Series incur the same level
of advisory fees as in 1995 and no taxes, interest or
extraordinary expenses), the Series' expense ratios during this
prospectus' effectiveness, assuming the continuation of the
voluntary expense agreement, are expected to be:
Total Expense
Ratio
Under Current
Voluntary
Series Expense
Agreement
Back Bay Advisors Money Market Series 0.50%
Back Bay Advisors Bond Income Series 0.55%
Back Bay Advisors Managed Series 0.64%
Westpeak Value Growth Series 0.85%
Westpeak Stock Index Series 0.40%
Loomis Sayles Small Cap Series 1.00%
Loomis Sayles Avanti Growth Series 0.85%
TNE Advisers Inc. may terminate these expense agreements at any
time. If these expense agreements were terminated, the expense
ratios would be higher.
Prior to November 1, 1994, The New England had agreed to pay
the charges and expenses of preparing, printing and distributing
prospectuses and reports to shareholders, custodial and transfer
agent charges and expenses, auditing, accounting and legal fees
and certain other expenses in connection with the affairs of the
Fund and the expenses of shareholders' and trustees' meetings.
Expense Deferral Arrangement
Pursuant to an expense deferral arrangement in effect beginning
November 1, 1994, relating to the Draycott International Equity
Series, the Alger Equity Growth Series, the Venture Value Series,
the Loomis Sayles Balanced Series, the Salomon Brothers Strategic
Bond Opportunities Series and the Salomon Brothers U.S.
Government Series, which TNE Advisers, Inc. may terminate at any
time, TNE Advisers, Inc. has agreed to pay the expenses of the
Series' operations (exclusive of any brokerage costs, interest,
taxes, or extraordinary expenses) in excess of stated expense
limits, which limits vary from Series to Series, subject to the
obligation of the Series to repay TNE Advisers, Inc. such
expenses in future years, if any, when a Series' expenses fall
below the stated expense limit that pertains to that Series; such
deferred expenses may be charged to a Series in a subsequent year
to the extent that the charge does not cause the total expenses
in such subsequent year to exceed the Series' stated expense
limit; provided, however, that no Series is obligated to repay
any expense paid by TNE Advisers, Inc. more than two years after
the end of the fiscal year in which such expense was incurred.
For the Draycott International Equity Series, TNE Advisers, Inc.
has agreed to defer such expenses in excess of 1.30% of net
assets until a subsequent year, if any, when total expenses are
less than 1.30% of net assets; for the Alger Equity Growth
Series, TNE Advisers, Inc. has agreed to defer such expenses in
excess of 0.90% of net assets until a subsequent year, if any,
when total expenses are less than 0.90% of net assets (prior to
January 1, 1996 the expense deferral arrangement had been limited
to 0.85%); for the Venture Value Series, TNE Advisers, Inc. has
agreed to defer such expenses in excess of 0.90% of net assets
until a subsequent year, if any, when total expenses are less
than 0.90% of net assets; for the Loomis Sayles Balanced Series,
TNE Advisers, Inc. has agreed to defer such expenses in excess of
0.85% of net assets until a subsequent year, if any, when total
expenses are less than 0.85% of net assets; for the Salomon
Brothers Strategic Bond Opportunities Series, TNE Advisers, Inc.
has agreed to defer such expenses in excess of 0.85% of net
assets until a subsequent year, if any, when total expenses are
less than 0.85% of net assets; for the Salomon Brothers
U.S.Government Series, TNE Advisers, Inc. has agreed to defer
such expenses in excess of 0.70% of net assets until a subsequent
year, if any, when total expenses are less than 0.70% of net
assets. These expense limits can be prospectively discontinued by
TNE Advisers, Inc. but any expenses that were deferred while a
Series' expense limit was in place can never be charged to that
Series unless that Series' expenses fall below the limit.
</R.>
Additional Information About Expenses
The Series pay all expenses not borne by TNE Advisers, Inc.,
the subadvisers, CGM or the Distributor, including, but not
limited to, the charges and expenses of the respective Series'
custodian, independent auditors and legal counsel, all brokerage
commissions and transfer taxes in connection with portfolio
transactions, all taxes and filing fees, the fees and expenses
for registration or qualification of its shares under federal or
state securities laws, all expenses of shareholders' and
trustees' meetings and preparing, printing and mailing
prospectuses and reports to shareholders and the compensation of
trustees of the Fund who are not directors, officers or employees
of The New England or its affiliates, other than affiliated
registered investment companies.
The Fund incurred total expenses during the one-year period
ended December 31, 1995 as follows:
Total Expenses
(as of a percentage of
Average net assets) for the
one year period ended
SERIES December 31, 1995
Loomis Sayles Small Cap 0.99
Series
Draycott International Equity 1.30
Series
Alger Equity Growth Series 0.83
Capital Growth Series 0.71
Loomis Sayles Avanti Growth 0.85
Series
Venture Value Series 0.90
Westpeak Value Growth Series 0.85
Westpeak Stock Index Series 0.40
Loomis Sayles Balanced Series 0.84
Back Bay Advisors Managed 0.64
Series
Salomon Brothers Strategic
Bond Opportunities 0.84
Series
Back Bay Advisors Bond Income 0.55
Series
Salomon Brothers U.S. 0.70
Government Series
Back Bay Advisors Money 0.50
Market Series
If the voluntary expense agreement and expense deferral
arrangement described above had not been in effect, the Series'
expenses for the one year period ended December 31, 1995 would
have been:
Total Expenses (as a
percentage of net assets)
without voluntary expense
agreement for the one year
period ended December 31,
SERIES 1995
Loomis Sayles Small Cap 1.91
Series
Draycott International Equity 3.12
Series
Alger Equity Growth Series 2.45
Capital Growth Series 0.71
Loomis Sayles Avanti Growth 1.06
Series
Venture Value Series 1.51
Westpeak Value Growth Series 1.06
Westpeak Stock Index Series 0.54
Loomis Sayles Balanced Series 1.85
Back Bay Advisors Managed 0.64
Series
Salomon Brothers Strategic
Bond Opportunities 2.44
Series
Back Bay Advisors Bond Income 0.55
Series
Salomon Brothers U.S. 2.90
Government Series
Back Bay Advisors Money 0.51
Market Series
These expense figures do not include portfolio brokerage
commission,which are not deducted from the Series' assets in the
same manner as other charges and expenses; rather, brokerage
commissions are part of the purchase price paid for portfolio
securities and reduce the proceeds received on the sale of
portfolio securities.
For the one-year period ended December 31, 1995, the Loomis
Sayles Small Cap Series paid___ in brokerage commissions, the
Draycott International Equity Series paid ___ in brokerage
commissions, the Alger Equity Growth Series paid $69,052 in
brokerage commissions, the Capital Growth Series paid a total of
____ in brokerage commissions, the Loomis Sayles Avanti Growth
Series paid a total of ___ in brokerage commissions, the Venture
Value Series paid a total of $40,523 in brokerage commissions,
the Westpeak Value Growth Series paid a total of ___ in brokerage
commissions, the Westpeak Stock Index Series paid a total of
_____ in brokerage commissions, the Loomis Sayles Balanced Series
paid a total of ___ in brokerage commissions and the Back Bay
Advisors Managed Series paid a total of $1,615 in brokerage
commissions on its common stock portfolio transactions. These
brokerage commissions equaled ___% of the Loomis Sayles Small Cap
Series' average net assets, ___% of the Draycott International
Equity Series' average net assets, ___% of the Alger Equity
Growth Series' average net assets, ___% of the Capital Growth
Series' average net assets, ___% of the Loomis Sayles Avanti
Growth Series' average net assets, ___% of the Venture Value
Series' average net assets,___% of the Westpeak Value Growth
Series' average net assets, __% of the Westpeak Stock Index
Series' average net assets, ___% of the Loomis Sayles Balanced
Series' average net assets and ___% of the Back Bay Advisors
Managed Series' average net assets. The Alger Equity Growth Series
may pay brokerage commissions to a brokerage firm affiliated
with the Series' subadviser. Portfolio transactions of
the Salomon Brothers Strategic Bond Opportunities Series, Back
Bay Advisors Bond Income Series, Salomon Brothers U.S. Government
Series and Back Bay Advisors Money Market Series and portfolio
transactions of the Back Bay Advisors Managed and the Loomis
Sayles Balanced Series in bonds, notes and money market
instruments are generally on a net basis without a stated
commission.
Miscellaneous Arrangements
The Series' adviser has contracted with New England Funds, L.P.
to provide executive and other personnel for the administration
of Fund affairs. Subject to procedures adopted by the Fund's
Board of Trustees, Fund brokerage transactions may be executed by
brokers that are affiliated with any adviser or subadviser.
Fund shares are offered through New England Securities, 399
Boylston Street, Boston, Massachusetts 02116, the principal
underwriter for the Fund. New England Securities is a wholly-
owned subsidiary of The New England.
SALE AND REDEMPTION OF SHARES
Shares of each Series are purchased or redeemed depending,
among other things, on the amount of premium payments invested
and the surrender and transfer requests effected on any given day
pursuant to the variable life insurance and variable annuity
contracts supported by the Fund. Such transactions can be made
only on those days during which the New York Stock Exchange is
open for trading. Purchases and redemptions of Fund shares are
effected at the net asset value per share determined as of the
close of regular trading on the New York Stock Exchange on the
day such purchase order or redemption request is received.
The Fund may suspend the right of redemption for any Series and
may postpone payment for any period when the New York Stock
Exchange is closed for other than weekends or holidays, or, if
permitted by the rules of the SEC, during periods when trading on
the New York Stock Exchange is restricted or during an emergency
which makes it impracticable for a Series to dispose of
securities or fairly to determine the value of its net assets, or
during any other period permitted by the SEC for the protection
of investors.
NET ASSET VALUES AND PORTFOLIO VALUATION
Loomis Sayles, Draycott, Alger Management, CGM, Davis Selected,
Westpeak, Back Bay Advisors and SBAM, under the direction of the
Board of Trustees, determine the value of each Series' securities
under the direction of the Fund's Board of Trustees. The net
asset value of each Series' shares is determined as of the close
of regular trading on the New York Stock Exchange each day it is
open. Each Series' total net assets are divided by the number of
outstanding shares of that Series to determine the net asset
value per share for that Series.
The Back Bay Advisors Money Market Series' investment
portfolio, and any fixed-income securities with remaining
maturities of 60 days or less held by any other Series, are
valued at amortized cost. Other portfolio securities of each
Series (other than the Back Bay Advisors Money Market Series) are
valued at market value where current market quotations are
readily available and otherwise are taken at fair value as
determined in good faith by the Board of Trustees, although the
actual calculations may be made by persons acting pursuant to the
direction of the Board.
The Back Bay Advisors Money Market Series seeks to maintain a
constant net asset value per share of $100, although this cannot
be assured. The net asset value per share for the other Series
will vary depending on the value of each Series' investment
portfolio.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Back Bay Advisors Money Market Series
The net investment income of the Back Bay Advisors Money Market
Series is declared daily and paid monthly as a dividend. Although
the Back Bay Advisors Money Market Series does not expect to
realize any long-term capital gains, if such gains are realized
they will be distributed once a year.
Other Series
It is the policy of each Series other than the Back Bay
Advisors Money Market Series to pay annually as dividends
substantially all net investment income and to distribute
annually all net realized capital gains, if any, after offsetting
any capital loss carryovers. See ''Taxes.'' Dividends from net
investment income may be paid more or less often if the Board of
Trustees deems it appropriate.
Federal income tax law requires each Series to distribute prior
to calendar year end virtually all of its ordinary income for
such year and virtually all of the capital gain net income
realized by the Series in the one-year period ending October 31
(or December 31, if the Series so elects) of such year and not
previously distributed.
Dividends and distributions of each Series are automatically
reinvested in shares of the respective Series.
TAXES
Each Series is treated as a separate taxable entity for federal
income tax purposes and intends to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as
amended. So long as a Series distributes all of its net
investment income and net capital gains to its shareholders, the
Series itself does not pay any federal income tax. Dividends from
net investment income of each of the Series and distributions of
each Series' net short-term gains, if any, are ordinary income to
its shareholders. Distributions of any Series' net realized long-
term capital gains, if any, are long-term capital gains to its
shareholders. Whether or not taxes must be paid by the
shareholders of a Series on distributions received from that
Series will depend on the tax status of NEVLICO's or The New
England's separate accounts and the tax status of any other
shareholders. For the purposes of the foregoing, each Series'
shareholders are the separate accounts investing directly in the
Fund and are not the owners of the variable life insurance or
variable annuity contracts for which the Fund serves as an
investment vehicle. For a description of the tax consequences for
such contract owners, see the relevant prospectus applicable to
such contracts.
ORGANIZATION AND CAPITALIZATION OF THE FUND
The Fund was originally organized in 1983 as a Massachusetts
corporation and was reorganized into a Massachusetts business
trust on February 27, 1987. The Fund is registered as a
diversified, open-end management company under the 1940 Act and
is authorized to issue an unlimited number of shares of each
Series. Shareholders may address inquiries about the Fund to New
England Securities, 399 Boylston Street, Boston, Massachusetts
02116.
As of the date of this prospectus, all of the outstanding
voting securities of the Fund are owned by separate accounts of
The New England and/or NEVLICO, and may, from time to time, be
owned by those separate accounts and the general account of The
New England. Therefore, The New England and NEVLICO are presumed
to be in control (as that term is defined in the 1940 Act) of the
Fund. However, the staff of the SEC is presently of the view
that The New England and NEVLICO are each required to vote their
Fund shares that are held in a separate account that is a
registered investment company under the 1940 Act (and, to the
extent voting privileges are granted by the issuing insurance
company, in unregistered separate accounts) in the same
proportion as the voting instructions received from owners of the
variable life insurance or variable annuity contracts issued by
the separate account, and that The New England is required to
vote any shares held in its general account (or in any
unregistered separate account that does not have voting
privileges) in the same proportion as all other Fund shares are
voted. The New England and NEVLICO currently intend to vote their
shares in a manner consistent with this view.
The Fund does not generally hold annual meetings of
shareholders and will hold shareholders meetings only when
required by law. Shareholders may remove trustees from office by
votes cast at a shareholder meeting or by written consent.
TRANSFER AGENT
The transfer agent and the dividend paying agent for the Fund
is The New England, 501 Boylston Street, Boston, Massachusetts
02116.
VOTING RIGHTS
Fund shareholders are entitled to one vote for each full
share held (with fractional votes for fractional shares held).
NEVLICO and The New England are the legal owners of shares
attributable to variable life insurance and variable annuity
contracts issued by their separate accounts, and have the right
to vote those shares. Pursuant to the current view of the SEC
staff, NEVLICO and The New England will vote their shares in
accordance with instructions received from owners of variable
life insurance and variable annuity contracts issued by separate
accounts that are registered under the 1940 Act. All Fund shares
held by separate accounts of NEVLICO and The New England that are
registered under the 1940 Act (and, to the extent voting
privileges are granted by the issuing insurance company, by
unregistered separate accounts) for which no timely instructions
are received will be voted for, voted against or withheld from
voting on any proposition in the same proportion as the shares
held in that separate account for all contracts for which voting
instructions are received. All Fund shares held by the general
investment account (or any unregistered separate account that
does not have voting privileges) of NEVLICO or The New England
will be voted in the same proportion as the aggregate of (i) the
shares for which voting instructions are received and (ii) the
shares that are voted in proportion to such voting instructions.
<PAGE>
APPENDIX A
RATINGS OF SECURITIES
Description of Moody's Investors Service, Inc. corporate bond
ratings:
Aaa, Aa, A_Bonds which are rated AAA or Aa are judged to be of
high quality by all standards and are generally known as high
grade bonds. Bonds rated Aa are rated lower than Aaa securities
because margins of protection may not be as large as in the
latter or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa_Bonds which are rated Baa are considered medium grade
obligations, i.e., they are neither higher protected nor poorly
secured. Interest payments and principal security appear adequate
for the present, but certain protective elements may be lacking
or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba_Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B_Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa_Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest.
Ca_Bonds which are rated Ca represent obligations which are
speculative in high degree. Such issues are often in default or
have other marked shortcomings.
C_Bonds which are rated C are the lowest rated class of bonds
and can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Description of Standard & Poor's Ratings Group corporate bond
ratings:
AAA, AA, A_Bonds rated AAA have the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest
and repay principal is extremely strong. Bonds rated AA have a
very strong capacity to pay interest and repay principal and
differ from the highest rated issues only in small degree. Bonds
rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than bonds in high rated categories.
BBB_Bonds rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to repay principal and pay interest for bonds
in this category than for bonds in higher rated categories.
BB-B-CCC-CC_Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CI_The rating CI is reserved for income bonds on which no
income is being paid.
D_Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
<PAGE>
NEW ENGLAND ZENITH FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
This Statement of Additional Information is not a prospectus.
This Statement of Additional Information relates to the
Prospectus dated May 1, 1996, and should be read in conjunction
therewith. A copy of the Prospectus may be obtained from New
England Securities Corporation, 399 Boylston Street, Boston,
Massachusetts 02116.
<PAGE>
TABLE OF CONTENTS
Page
Investment Objectives and Policies
Miscellaneous Investment Practices
Determination of Net Asset Values
Fund Performance
Trustees and Officers
Advisory Arrangements
Distribution Agreement
Other Services
Portfolio Transactions and Brokerage
Description of the Fund
Appendix A-1 (Description of Bond Ratings)
Appendix A-2 (Description of Commercial Paper Ratings)
Appendix B
Appendix C Financial Statements and report of independent
accountants
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Series
(collectively and individually the "Series") of New England
Zenith Fund (the "Fund") are summarized on the front page of the
Prospectus and in the text of the Prospectus following the
caption "Investment Objectives and Policies." There can be no
assurance that any of the Series will achieve its objective. The
investment policies of each Series set forth in the Prospectus
and in this Statement of Additional Information may be changed
without shareholder approval, except for any policy as to which
the Prospectus or this Statement of Additional Information
explicitly indicates that such approval is required, and except
for the investment objectives of the Money Market, Bond Income,
Capital Growth, Value Growth, Avanti Growth, Stock Index, Managed
and Small Cap Series, which have fundamental investment
objectives.
The terms "shareholder approval" and "approval of a majority
of the outstanding voting securities," as used in the Prospectus
and this Statement of Additional Information, mean, with respect
to a Series, approval by the lesser of (i) 67% of the shares of
the Series represented at a meeting at which more than 50% of the
outstanding shares of such Series are represented or (ii) more
than 50% of the outstanding shares of such Series.
Loomis Sayles Small Cap Series
As indicated in the Prospectus following the caption
"Investment Objective and Policies -- Loomis Sayles Small Cap
Series," the Loomis Sayles Small Cap Series seeks to attain its
investment objective of long-term capital growth through
investments in common stocks or their equivalent.
Loomis Sayles, the Series' subadviser, manages the Series by
investing primarily in stocks of small cap companies with good
earnings growth potential that Loomis Sayles believes are
undervalued by the market. Typically, such companies range in
size from $100 million to $500 million in market capitalization,
have better than average growth rates at below average
price/earnings ratios and have strong balance sheets and cash
flow. Loomis Sayles seeks to build a core small cap portfolio of
solid growth company stocks, with a smaller emphasis on special
situations and turnarounds (companies that have experienced
signficiant business problems but which Loomis Sayles believes
have favorable prospects for recovery), as well as unrecognized
stocks.
Under unusual market conditions as determined by Loomis
Sayles, all or any portion of the Series may be invested, for
temporary, defensive purposes, in short-term debt instruments or
in cash. In addition, under normal conditions, a portion of the
Series' assets may be invested in short-term assets for liquidity
purposes or pending investment in other securities. Short-term
investments may include U.S. Government securities, certificates
of deposit, commercial paper and other obligations of corporate
issuers rated in the top two rating categories by a major rating
agency or, if unrated, determined to be of comparable quality by
the subadviser, and repurchase agreements that are fully
collateralized by cash, U.S. Government securities or high-
quality money market instruments.
Draycott International Equity Series
As disclosed in the Prospectus under the caption "Investment
Objectives and Policies -- Draycott International Equity Series,"
the Draycott International Equity Series seeks to attain its
investment objective of total return from long-term growth of
capital primarily through investment in international equity
securities.
Alger Equity Growth Series
As disclosed in the Prospectus under the caption "Investment
Objectives and Policies -- Alger Equity Growth Series," the Alger
Equity Growth Series seeks to attain its investment objective of
long-term capital appreciation by investing primarily in a
diversified, actively managed portfolio of equity securities,
primarily of companies having a total market capitalization of $1
billion or greater. These companies may still be in the
developmental stage, may be older companies that appear to be
entering a new stage of growth progress, or may be companies
providing products or services with a high unit volume growth
rate.
Capital Growth Series
As disclosed in the Prospectus under the caption "Investment
Objectives and Policies -- Capital Growth Series," the Capital
Growth Series seeks to attain its investment objective of long-
term growth of capital through investment primarily in equity
securities of companies whose earnings are expected to grow at a
faster rate than the United States economy. The selection of
common stocks for the Capital Growth Series' investment portfolio
is based on the assessment of the Series' adviser, Capital Growth
Management Limited Partnership ("CGM"), that the common stock is
attractively priced relative to its earnings and growth
potential.
The Series does not consider current income as a significant
factor in selecting its investments. However, during periods
when management considers that economic or market conditions make
it desirable, the Series may take a defensive position by
investing a substantial portion of its assets in cash or fixed-
income securities (bonds, notes and money market instruments).
No estimate can be made as to when or for how long the Series
will employ such defensive strategies; however, in the past, such
periods have been as long as one year.
The Capital Growth Series does not currently intend to
invest in restricted securities, options or warrants although,
subject to its investment restrictions, it may do so in the
future. See "Investment Restrictions."
Although the Capital Growth Series' objective is long-term
capital growth, it frequently sells securities to reflect changes
in market, industry or individual company conditions or outlook
even though it may only have held those securities for a short
period. As a result of these policies, the Capital Growth
Series, under certain market conditions, may experience high
portfolio turnover, although specific portfolio turnover rates
are impossible to predict. In recent years, the portfolio
turnover rate of the Capital Growth Series has fluctuated
considerably as a result of strategic shifts in portfolio
holdings designed to maintain an optimum portfolio structure in
view of general market conditions and movements in individual
stock prices.
Loomis Sayles Avanti Growth Series
As disclosed in the Prospectus under the caption "Investment
Objectives and Policies -- Loomis Sayles Avanti Growth Series,"
the Loomis Sayles Avanti Growth Series seeks to attain its
investment objective of long-term growth of capital through
ordinarily investing substantially all of its assets in equity
securities. Investments are selected by the Series' subadviser,
Loomis, Sayles & Company, L.P. ("Loomis Sayles"), based on their
growth potential; current income is not a consideration.
Although the Loomis Sayles Avanti Growth Series' objective
is long-term capital growth, it may sell securities to reflect
changes in Loomis Sayles' assessment of the relative
attractiveness of particular investments. As a result, the
Loomis Sayles Avanti Growth Series, under certain market
conditions, may experience high portfolio turnover. High
portfolio turnover involves correspondingly higher brokerage
commissions than would be experienced by a similar fund with
lower turnover. In addition, the Series may invest cash
temporarily in money market instruments and related repurchase
agreements, as described below under "Miscellaneous Investment
Practices--Money Market Instruments."
Venture Value Series
As disclosed in the Prospectus under the caption "Investment
Objectives and Policies -- Venture Value Series," the Venture
Value Series seeks to attain its investment objective of growth
of capital by investing in domestic common stocks that the
Series' subadviser believes have capital growth potential due to
factors such as undervalued assets or earnings potential, product
development and demand, favorable operating ratios, resources for
expansion, management abilities, reasonableness of market price,
and favorable overall business prospects. The Series will
generally invest predominantly in equity securities of companies
with market capitalizations of at least $250 million. It may
also invest in issues with smaller capitalizations.
Westpeak Value Growth Series
As disclosed in the Prospectus under the caption "Investment
Objectives and Policies -- Westpeak Value Growth Series," the
Westpeak Value Growth Series seeks long-term total return
(capital appreciation and dividend income) through investment in
equity securities, both in securities that the Series'
subadviser, Westpeak Investment Advisors, L.P. ("Westpeak"),
believes are undervalued ("value" style) and securities of
companies that Westpeak believes have growth potential ("growth"
style). The Westpeak Value Growth Series will ordinarily invest
substantially all of its assets in equity securities.
Although the Westpeak Value Growth Series' objective is long-
term total return, it may sell securities to reflect changes in
Westpeak's assessment of the relative attractiveness of
particular investments. As a result, the Westpeak Value Growth
Series, under certain market conditions, may experience high
portfolio turnover. High portfolio turnover involves
correspondingly higher brokerage commissions than would be
experienced by a similar fund with lower turnover.
The assets of the Westpeak Value Growth Series that are not
invested in equity securities will be held in cash or invested as
described below under "Miscellaneous Investment Practices--Money
Market Instruments."
Westpeak Stock Index Series
As disclosed in the Prospectus under the caption "Investment
Objectives and Policies -- Westpeak Stock Index Series," the
Westpeak Stock Index Series uses the Standard & Poor's 500
Composite Stock Index ("S&P 500 Index") as the standard of
performance comparison because that index currently represents a
significant percentage of the total market value of all United
States publicly traded common stocks, is well known to investors,
and is commonly regarded as representative of the performance of
United States publicly traded common stocks taken as a whole.
The S&P 500 Index is composed of 500 common stocks, most of
which are listed on the New York Stock Exchange. Standard &
Poor's, which is not a sponsor of or in any other way affiliated
with the Series, chooses the 500 stocks included in the S&P 500
Index on the basis of market value and industry diversification.
The S&P 500 Index assigns relative values to the stocks included
in the index, weighted according to each stock's total market
value relative to the total market value of the other stocks
included in the index. The stocks included in the S&P 500 Index
may change from time to time.
The Westpeak Stock Index Series is not managed through
traditional methods of investment management, which typically
attempt to use economic, financial and market analysis to select
undervalued stocks or stocks of companies that may experience
above-average growth, nor will the adverse financial situation of
a company necessarily result in the elimination of its stock from
the Westpeak Stock Index Series' portfolio. As described in the
Prospectus, stocks will be selected in an attempt to approximate
the performance of the S&P 500 Index and to minimize tracking
error. From time to time, adjustments may be made in the
Westpeak Stock Index Series' investment portfolio, but such
changes should be infrequent compared to those of most management
investment companies. Westpeak currently expects that such
adjustments will ordinarily be made on a monthly basis, but such
adjustments could be made more or less frequently, depending on
changes in the size of the Westpeak Stock Index Series, among
other factors. As a consequence of the relative infrequency of
portfolio adjustments, brokerage and other transaction costs are
expected to be relatively low. However, these costs and other
expenses may cause the return of the Westpeak Stock Index Series
to be lower than the return of the S&P 500 Index. In addition,
the relative infrequency of portfolio adjustments may result in
increased tracking error, to the extent that new cash that has
come into the Series is held, or invested in money market
instruments and repurchase agreements, pending the next portfolio
adjustment, rather than invested immediately in common stocks
included in the S&P 500 Index.
It is the Westpeak Stock Index Series' policy to be fully
invested in common stocks. However, the Westpeak Stock Index
Series may hold a portion of its assets, which will not exceed 5%
(not including additional cash that has come into the Series and
is pending investment in common stocks), in cash to meet
redemptions and other day-to-day operating expenses. The Series
may also engage in futures transactions to reduce tracking error.
In addition, the Westpeak Stock Index Series may invest cash
temporarily in money market instruments and repurchase
agreements, as described below under "Miscellaneous Investment
Practices -- Money Market Instruments". Such temporary
investments will only be made with cash held to maintain
liquidity or pending investment, and will not be made for
defensive purposes in the event or in anticipation of a general
decline in the market prices of stocks in which the Series
invests. A defensive investment posture is precluded by the
Westpeak Stock Index Series' investment objective to provide
investment results that correspond to the price and yield
performance of a universe of common stocks. Investors in the
Westpeak Stock Index Series therefore bear the risk of general
declines in stock prices in the stock markets.
The index that the Westpeak Stock Index Series uses as a
standard of comparison in seeking to achieve its objective may be
changed without shareholder approval. At some time in the
future, another index may be selected if such a standard of
comparison is deemed more appropriate than the S&P 500 Index as
an indicator of the performance of United States publicly traded
common stocks.
Loomis Sayles Balanced Series
As disclosed in the Prospectus under the caption "Investment
Objectives and Policies -- Loomis Sayles Balanced Series," the
Loomis Sayles Balanced Series seeks to attain its investment
objective of reasonable long-term investment return from a
combination of long-term capital appreciation and moderate
current income.
The Series is "flexibly managed" in that sometimes it
invests more heavily in equity securities and at other times it
invests more heavily in fixed-income securities, depending on its
subadviser's view of the economic and investment outlook. Most
of the Series' investments are normally in dividend-paying common
stocks of recognized investment quality that are expected to
achieve growth in earnings and dividends over the long-term.
Fixed-income securities include notes, bonds, non-convertible
preferred stock and money market instruments. The Series may
invest in adjustable rate mortgage securities, asset-backed
securities, STRIPS and inverse floaters, subject to a limit of 5%
of the Series' assets for each of these types of instruments.
The Series invests at least 25% of its assets in fixed-income
senior securities and, under normal market conditions, more than
50% of its assets in equity securities. The Series also may
invest in foreign securities.
Back Bay Advisors Managed Series
As indicated in the Prospectus following the caption
"Investment Objective and Policies -- Back Bay Advisors Managed
Series," the Back Bay Advisors Managed Series' investment
portfolio will generally contain a mix of (1) common stocks, (2)
notes and bonds and (3) money market instruments. Each of these
categories of investments involves certain risks.
The text of the Prospectus following the caption "Investment
Objective and Policies -- Back Bay Advisors Money Market Series,"
contains a description of the money market instruments and
related repurchase agreements in which the Back Bay Advisors
Managed Series may invest; for a fuller description, see
"Miscellaneous Investment Practices--Money Market Instruments,"
below.
The portion of the Back Bay Advisors Managed Series'
investment portfolio consisting of notes and bonds will be
invested in bonds of the types in which the Back Bay Advisors
Bond Income Series is permitted to invest. These investments may
include both bonds in the four highest rating categories of
Moody's or Standard & Poor's (which are described in Appendix A-1
hereto) and lesser rated or non-rated bonds (the risks associated
with which are described in the Prospectus under "Investment
Objectives and Policies -- Back Bay Advisors Bond Income
Series"). The Series will purchase and sell securities for the
bond portion of its portfolio in anticipation of or in response
to changes in yield relationships, markets or economic
conditions. The bond portion of the Series' investment portfolio
will also be invested to take advantage of temporary disparities
in the relative values of certain sectors of the market for fixed-
income securities. As a result of these policies, the bond
portion of the Series' portfolio, under certain market
conditions, may experience high portfolio turnover.
Because the securities in its portfolio are subject to price
declines as well as price advances, at times the net asset value
per Back Bay Advisors Managed Series share may be less than a
shareholder's original cost. There can be no assurance that the
Back Bay Advisors Managed Series' investment objective will be
attained.
Salomon Brothers Strategic Bond Opportunities Series
As disclosed in the Prospectus under the caption "Investment
Objectives and Policies -- Salomon Brothers Strategic Bond
Opportunities Series," the Salomon Brothers Strategic Bond
Opportunities Series seeks to attain its investment objective of
a high level of total return consistent with preservation of
capital by assessing the relative risks and opportunities
available in various market segments and allocating assets
primarily among U.S. Government obligations, mortgage backed
securities, domestic corporate debt and international debt
securities rated investment grade (BBB or higher by S&P or Baa or
higher by Moody's) and domestic and sovereign corporate debt and
international debt securities rated below investment grade.
Back Bay Advisors Bond Income Series
The text of the Prospectus following the caption "Investment
Objectives and Policies -- Back Bay Advisors Bond Income Series"
gives a description of the securities in which the Back Bay
Advisors Bond Income Series may invest. Although at least 80% of
the Series' bond investments will carry investment grade ratings
(see Appendix A-1) from one of the recognized rating services,
the Series may purchase nonrated or lower-rated bonds, which may
be traded only over-the-counter. Nonrated bonds are so
categorized because the bond's rating has been suspended or
because the issuer did not seek a rating of the bonds from
Moody's or Standard & Poor's.
As described in the Prospectus, the average maturity of the
Back Bay Advisors Bond Income Series' portfolio will usually be
between five and fifteen years. Depending on market conditions,
the Back Bay Advisors Bond Income Series may take a defensive
position by investing a substantial portion of its assets in the
money market instruments eligible for purchase by the Back Bay
Advisors Money Market Series. No estimate can be made as to when
or for how long the Series would employ such defensive
strategies.
The Back Bay Advisors Bond Income Series purchases and sells
portfolio investments in anticipation of or in response to
changes in yield relationships, markets or economic conditions.
The Back Bay Advisors Bond Income Series also invests to take
advantage of temporary disparities in the relative values of
certain sectors of the market for fixed-income securities. As a
result of these policies, the Back Bay Advisors Bond Income
Series, under certain market conditions, may experience high
portfolio turnover, although specific portfolio turnover rates
are impossible to predict.
Since levels of interest rates vary from time to time, there
can be no assurance as to the Back Bay Advisors Bond Income
Series' current income for any particular period. Moreover,
since all securities are subject to price declines as well as
price advances, at times the net asset value per Back Bay
Advisors Bond Income Series share may be less than a
shareholder's original cost. In recent years, prices for fixed-
income securities have generally been more volatile than they
were in prior periods, and this has increased the market risk of
holding such securities.
Salomon Brothers U.S. Government Series
As disclosed in the Prospectus under the caption "Investment
Objectives and Policies -- Salomon Brothers U.S. Government
Series," the Salomon Brothers U.S. Government Series seeks to
attain its investment objective of providing a high level of
current income consistent with preservation of capital and
maintenance of liquidity by investing primarily in debt
obligations and, to the extent allowed by state law and
regulation, in mortgage backed securities issued or guaranteed by
the U. S. Government its agencies, authorities or
instrumentalities or derivative securities such as collateralized
mortgage obligations ("CMOs") backed by such securities.
Back Bay Advisors Money Market Series
The text of the Prospectus following the caption "Investment
Objectives and Policies -- Back Bay Advisors Money Market Series"
gives a description of the money market instruments in which the
Back Bay Advisors Money Market Series may invest. For a fuller
description of those money market instruments and some of the
risks relating thereto, see "Money Market Instruments," below.
The Back Bay Advisors Money Market Series will invest only in
securities which the Series' subadvisers, Back Bay Advisors, L.P.
("Back Bay Advisors"), acting pursuant to guidelines established
by the Fund's Board of Trustees has determined are of high
quality and present minimal credit risk.
As indicated in the Prospectus, all the Back Bay Advisors
Money Market Series' money market instruments mature in less than
397 days and the average maturity of the Back Bay Advisors Money
Market Series' portfolio securities based on their dollar value
will not exceed 90 days at the time of each investment. Money
market instruments maturing in less than 397 days tend to yield
less than obligations of comparable quality having longer
maturities. See "Valuation of Portfolio Securities" and "Fund
Performance." Where obligations of greater than one year are
used to secure the Back Bay Advisors Money Market Series'
repurchase agreements, the repurchase agreements themselves will
have very short maturities. If the disposition of a portfolio
security results in a dollar-weighted average portfolio maturity
in excess of 90 days, the Back Bay Advisors Money Market Series
will invest its available cash in such a manner as to reduce its
dollar-weighted average portfolio maturity to 90 days or less as
soon as reasonably practicable.
In seeking to provide the highest possible level of current
income consistent with preservation of capital, the Back Bay
Advisors Money Market Series may not necessarily invest in money
market instruments paying the highest available yield at a
particular time. The Back Bay Advisors Money Market Series,
consistent with its investment objective, attempts to maximize
income by engaging in portfolio trading and by buying and selling
portfolio investments in anticipation of or in response to
changing economic and money market conditions and trends. The
Series may also invest to take advantage of what are believed to
be temporary disparities in the yields of different segments of
the high grade money market or among particular instruments
within the same segment of the market. These policies, as well
as the relatively short maturity of obligations to be purchased
by the Series, may result in frequent changes in the Series'
investment portfolio of money market instruments.
The value of the securities in the Series' investment
portfolio can be expected to vary inversely to changes in
prevailing interest rates. Thus, if interest rates increase
after a security is purchased, that security, if sold, might be
sold at less than cost. Conversely, if interest rates decline
after purchase, the security, if sold, might be sold at a profit.
In either instance, if the security were held to maturity, no
gain or loss would normally be realized as a result of these
fluctuations. Substantial redemptions of shares of the Back Bay
Advisors Money Market Series could require the sale of portfolio
investments at a time when a sale might not be desirable.
MISCELLANEOUS INVESTMENT PRACTICES
The following information relates to certain investment
practices in which certain Series may engage. The table
indicates which Series may engage in each of these practices.
Practices Series
Money Market Instruments All Series
U.S. Government Securities All Series
Convertible Securities Draycott International Equity
Series
Alger Equity Growth Series
Capital Growth Series
Loomis Sayles Avanti Growth
Series
Loomis Sayles Balanced Series
Back Bay Advisors Managed
Series
Salomon Brothers Strategic Bond
Opportunities Series
Back Bay Advisors Bond Income
Series
Reverse Repurchase Agreements Salomon Brothers Strategic Bond
and Dollar Rolls Opportunities Series
Salomon Brothers U.S.
Government Series
Loans of Portfolio Securities Alger Equity GrowthVenture Value Series
Series Back Bay Advisors Managed
Series
Salomon Brothers Strategic Bond
Opportunities Series
Back Bay Advisors Bond Income
Series
Salomon Brothers U.S.
Government Series
Privately-Issued Mortgage Salomon Brothers Strategic Bond
Securities Opportunities Series
Salomon Brothers U.S.
Government Series
Asset-Backed Securities; Types Loomis Sayles Balanced Series
of Credit Support Salomon Brothers Strategic Bond
Opportunities Series
Salomon Brothers U.S.
Government Series
STRIPS Loomis Sayles Balanced Series
Salomon Brothers Strategic Bond
Opportunities Series
Salomon Brothers U.S.
Government Series
Stripped Mortgage Securities Salomon Brothers Strategic Bond
Opportunities Series
Salomon Brothers U.S.
Government Series
Swaps, Caps, Floors, Collars, Salomon Brothers Strategic Bond
Etc. Opportunities Series
Eurodollar Futures and Options Salomon Brothers Strategic Bond
Opportunities Series
Salomon Brothers U.S.
Government Series
High Yield/High Risk Foreign Salomon Brothers Strategic Bond
Sovereign Debt Securities Opportunities Series
Futures and Options Draycott International Equity
Series
Venture Value Series
Westpeak Value Growth Series
Westpeak Stock Index Series
Loomis Sayles Balanced Series
Back Bay Advisors Managed
Series
Salomon Brothers Strategic Bond
Opportunities Series
Salomon Brothers U.S.
Government Series
Foreign Currency Hedging Draycott International Equity
Transactions Series
Venture Value Series
Salomon Brothers Strategic Bond
Opportunities Series
Money Market Instruments - Obligations of foreign branches of
U.S. banks and other foreign securities are subject to risks of
foreign political, economic and legal developments, which include
foreign governmental restrictions adversely affecting payment of
principal and interest on the obligations, foreign withholding
and other taxes on interest income, and difficulties in obtaining
and enforcing a judgment against a foreign branch of a domestic
bank. With respect to bank obligations, different risks may
result from the fact that foreign banks are not necessarily
subject to the same or similar regulatory requirements that apply
to domestic banks. For instance, such branches may not be
subject to the types of requirements imposed on domestic banks
with respect to mandatory reserves, loan limitations,
examinations, accounting, auditing, recordkeeping and the public
availability of information. Obligations of such branches will
be purchased by the Series only when the Series' adviser or
subadviser believes the risks are minimal.
The following constitutes a description of the money market
instruments which may be purchased by the Back Bay Advisors Money
Market Series, and by any of the Series for temporary defensive
purposes.
U.S. Government Securities -- are bills, certificates of
indebtedness, notes and bonds issued by agencies, authorities and
instrumentalities of the U.S. Government. Some obligations, such
as those issued by the U.S. Treasury, the Government National
Mortgage Association, the Farmers' Home Administration and the
Small Business Administration, are backed by the full faith and
credit of the U.S. Treasury. Other obligations are backed by the
right of the issuer to borrow from the U.S. Treasury or by the
credit of the agency, authority or instrumentality itself. Such
obligations include, but are not limited to, obligations issued
by the Tennessee Valley Authority, the Bank for Cooperatives,
Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Land Banks and the Federal National Mortgage Association.
Repurchase Agreements -- are agreements by which a Series
purchases a security (usually a U.S. Government Security) and
obtains a simultaneous commitment from the seller (a member bank
of the Federal Reserve System or, to the extent permitted by the
1940 Act, a recognized securities dealer) to repurchase the
security at an agreed upon price and date. The resale price is
in excess of the purchase price and reflects an agreed upon
market rate unrelated to the coupon rate on the purchased
security. Such transactions afford the Series the opportunity to
earn a return on temporarily available cash at minimal market
risk. While the underlying security may be a bill, certificate
of indebtedness, note or bond issued by an agency, authority or
instrumentality of the United States Government, the obligation
of the seller is not guaranteed by the U.S. Government and there
is a risk that the seller may fail to repurchase the underlying
security. In such event, the Series may be able to exercise
rights with respect to the underlying security, including
possible disposition of the security in the market. However, the
Series may be subject to various delays and risks of loss,
including (a) possible declines in the value of the underlying
security during the period while the Series seeks to enforce its
rights thereto, (b) possible reduced levels of income and lack of
access to income during this period and (c) inability to enforce
rights and the expenses involved in attempted enforcement.
Certificates of Deposit -- are certificates issued against
funds deposited in a bank, are for a definite period of time,
earn a specified rate of return and are normally negotiable.
Bankers' Acceptances -- are short-term credit instruments
used to finance the import, export, transfer or storage of goods.
They are termed "accepted" when a bank guarantees their payment
at maturity.
Eurodollar Obligations -- are obligations of foreign
branches of U.S. banks.
Commercial Paper -- refers to promissory notes issued by
corporations in order to finance their short-term credit needs.
For a description of commercial paper ratings see Appendix A-1.
U.S. Government Securities - The Series may invest in some
or all of the following U.S. Government Securities, as well as in
other types of securities issued or guaranteed by the U.S.
Government or its agencies, authorities or instrumentalities:
. U.S. Treasury Bills - Direct obligations of the United
States Treasury which are issued in maturities of one year or
less. No interest is paid on Treasury bills; instead, they are
issued at a discount and repaid at full face value when they
mature. They are backed by the full faith and credit of the
United States Government.
. U.S. Treasury Notes and Bonds - Direct obligations of the
United States Treasury issued in maturities that vary between one
and 40 years, with interest normally payable every six months.
These obligations are backed by the full faith and credit of the
United States Government.
. "Ginnie Maes" - Debt securities issued by a mortgage banker
or other mortgagee which represent an interest in a pool of
mortgages insured by the Federal Housing Administration or the
Farmer's Home Administration or guaranteed by the Veterans
Administration. The Government National Mortgage Association
("GNMA") guarantees the timely payment of principal and interest
when such payments are due, whether or not these amounts are
collected by the issuer of these certificates on the underlying
mortgages. Mortgages included in single family or multi-family
residential mortgage pools backing an issue of Ginnie Maes have a
maximum maturity of up to 30 years. Scheduled payments of
principal and interest are made to the registered holders of
Ginnie Maes (such as the Fund) each month. Unscheduled
prepayments may be made by homeowners, or as a result of a
default. Prepayments are passed through to the registered holder
(such as the Fund, which reinvests any prepayments) of Ginnie
Maes along with regular monthly payments of principal and
interest.
. "Fannie Maes" - The Federal National Mortgage Association
("FNMA") is a government-sponsored corporation owned entirely by
private stockholders that purchases residential mortgages from a
list of approved seller/servicers. Fannie Maes are pass-through
securities issued by FNMA that are guaranteed as to timely
payment of principal and interest by FNMA but are not backed by
the full faith and credit of the United States Government.
. "Freddie Macs" - The Federal Home Loan Mortgage Corporation
("FHLMC") is a corporate instrumentality of the United States
Government. Freddie Macs are participation certificates issued
by FHLMC that represent an interest in residential mortgages from
FHLMC's National Portfolio. FHLMC guarantees the timely payment
of interest and ultimate collection of principal, but Freddie
Macs are not backed by the full faith and credit of the United
States Government.
As described in the prospectus, U.S. Government Securities
do not involve the credit risks associated with investments in
other types of fixed-income securities, although, as a result,
the yields available from U.S. Government Securities are
generally lower than the yields available from corporate fixed-
income securities. Like other fixed-income securities, however,
the values of U.S. Government Securities change as interest rates
fluctuate. Fluctuations in the value of portfolio securities
will not affect interest income on existing portfolio securities
but will be reflected in the Series' net asset value. Since the
magnitude of these fluctuations will generally be greater at
times when the Series' average maturity is longer, under certain
market conditions, a Series may, for temporary defensive
purposes, accept lower current income from short-term investments
rather than investing in higher yielding long-term securities.
Convertible Securities - The Series listed above may invest
in convertible securities, including corporate bonds, notes or
preferred stocks of U.S. or foreign issuers that can be converted
into (that is, exchanged for) common stocks or other equity
securities. Convertible securities also include other
securities, such as warrants, that provide an opportunity for
equity participation. Because convertible securities can be
converted into equity securities, their values will normally vary
in some proportion with those of the underlying equity
securities. Convertible securities usually provide a higher
yield than the underlying equity, however, so that the price
decline of a convertible security may sometimes be less
substantial than that of the underlying equity security.
Reverse Repurchase Agreements and Dollar Roll Agreements -
The Series may enter into reverse repurchase agreements and
dollar roll agreements with qualified institutions to seek to
enhance returns.
Reverse repurchase agreements involve sales by the Series of
portfolio assets concurrently with an agreement by the Series to
repurchase the same assets at a later date at a fixed price.
During the reverse repurchase agreement period, the Series
continues to receive principal and interest payments on these
securities.
The Series may enter into dollar rolls in which the Series
sells securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar
(same type and coupon) securities on a specified future date.
During the roll period, the Series forgoes principal and interest
paid on the securities. The Series is compensated by the
difference between the current sales price and the forward price
for the future purchase (often referred to as the "drop") as well
as by the interest earned on the cash proceeds of the initial
sale.
The Series will establish a segregated account with its
custodian in which it will maintain cash, U.S. Government
securities or other liquid high-grade debt obligations equal in
value to its obligations in respect of reverse repurchase
agreements and dollar rolls. Reverse repurchase agreements and
dollar rolls involve the risk that the market value of the
securities retained by the Series may decline below the price of
the securities the Series has sold but is obligated to repurchase
under the agreement. In the event the buyer of securities under
a reverse repurchase agreement files for bankruptcy or becomes
insolvent, the Series' use of the proceeds of the agreement may
be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the Series' obligation to
repurchase the securities. Reverse repurchase agreements and
dollar rolls are considered borrowings by the Series.
Loans of Portfolio Securities - The Series listed above may
lend its portfolio securities to broker-dealers under contracts
calling for cash collateral equal to at least the market value of
the securities loaned, marked to market on a daily basis. (The
Series (except the Salomon Brothers U.S. Government Series) at
the present time have no intention to engage in the lending of
portfolio securities.) The Series will continue to benefit from
interest or dividends on the securities loaned and will also
receive interest through investment of the cash collateral in
short-term liquid investments, which may include shares of money
market funds subject to any investment restriction described in
the Prospectus. No loans will be made if, as a result, the
aggregate amount of such loans outstanding at any one time would
exceed 15% of the respective Series' total assets (taken at
current value). Any voting rights, or rights to consent,
relating to securities loaned pass to the borrower. However, if
a material event affecting the investment occurs, such loans will
be called so that the securities may be voted by the Series. A
Series pays various fees in connection with such loans, including
shipping fees and reasonable custodian and placement fees.
Privately-Issued Mortgage Securities - The Series listed
above may invest in privately-issued pass through securities that
provide for the monthly principal and interest payments made by
individual borrowers to pass through to investors on a corporate
basis, and in privately issued collateralized mortgage
obligations ("CMOs"; see the general description under
"Investment Risks" in the Prospectus). Privately-issued mortgage
securities are issued by private originators of, or investors in,
mortgage loans, including mortgage bankers, commercial banks,
investment banks, savings and loan associations and special
purpose subsidiaries of the foregoing. Since privately-issued
mortgage certificates are not guaranteed by an entity having the
credit status of GNMA or FHLMC, such securities generally are
structured with one or more types of credit enhancement. For a
description of the types of credit enhancements that may
accompany privately-issued mortgage securities, see "Types of
Credit Support" below. A Series will not limit its investments
to asset-backed securities with credit enhancements.
Asset Backed Securities As with mortgage securities, asset-
backed securities are often backed by a pool of assets
representing the obligation of a number of different parties and
use similar credit enhancement techniques. For a description of
the types of credit enhancement that may accompany privately-
issued mortgage securities, see "Types of Credit Support" below.
A Series will not limit its investments to asset-backed
securities with credit enhancements. Although asset-backed
securities are not generally traded on a national securities
exchange, many such securities are widely traded by brokers and
dealers, and in such cases will not be considered illiquid
securities for the purposes of the investment policy that limits
a Series' investments in illiquid securities to 15% of net
assets.
Types of Credit Support - Mortgage securities and asset-
backed securities are often backed by a pool of assets
representing the obligations of a number of different parties.
To lessen the effect of failure by obligors on underlying assets
to make payments, such securities may contain elements of credit
support. Such credit support falls into two categories: (i)
liquidity protection and (ii) protection against losses resulting
from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances,
generally by the entity administering the pool of assets, to
ensure that the pass-through of payments due on the underlying
pool occurs in a timely fashion. Protection against losses
resulting from ultimate default enhances the likelihood of
ultimate payment of the obligations on at least a portion of the
assets in the pool. Such protection may be provided through
guarantees, insurance policies or letters of credit obtained by
the issuer or sponsor from third parties, through various means
of structuring the transaction or through a combination of such
approaches. A Series will not pay any additional fees for such
credit support, although the existence of credit support may
increase the price of a security.
The ratings of mortgage securities and asset-backed
securities for which third-party credit enhancement provides
liquidity protection or protection against losses from default
are generally dependent upon the continued creditworthiness of
the provider of the credit enhancement. The ratings of such
securities could be subject to reduction in the event of
deterioration in the creditworthiness of the credit enhancement
provider even in cases where the delinquency and loss experience
on the underlying pool of assets is better than expected.
Examples of credit support arising out of the structure of
the transaction include "senior subordinated securities"
(multiple class securities with one or more classes subordinate
to other classes as to the payment of principal and interest,
with the result that defaults on the underlying assets are borne
first by the holders of the subordinated class), creation of
"reserve funds" (where cash or investments, sometimes funded from
a portion of the payments on the underlying assets, are held in
reserve against future losses) and "over-collateralization"
(where the scheduled payments on, or the principal amount of, the
underlying assets exceed those required to make payment of the
securities and pay any servicing or other fees). The degree of
credit support provided for each issue is generally based on
historical information with respect to the level of credit risk
associated with the underlying assets. Delinquency or loss in
excess of that which is anticipated could adversely affect the
return on an investment in such security.
STRIPS - In addition to the U.S. Government securities
discussed above, the Series listed above may invest in separately
traded interest components of securities issued or guaranteed by
the United States Treasury. The interest components of selected
securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities program
("STRIPS"). Under the STRIPS program, the interest components
are individually numbered and separately issued by the United
States Treasury at the request of depository financial
institutions, which then trade the component parts independently.
Stripped Mortgage Securities - Stripped mortgage securities
are derivative multiclass mortgage securities. Stripped mortgage
securities may be issued by agencies or instrumentalities of the
U.S. Government, or by private issuers, including savings and
loan associations, mortgage banks, commercial banks, investment
banks and special purpose subsidiaries of the foregoing.
Stripped mortgage securities have greater volatility than other
types of mortgage securities in which the Series invests.
Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms
acting as brokers or dealers, the market for such securities has
not yet been fully developed. Accordingly, stripped mortgage
securities are generally illiquid.
Stripped mortgage securities are usually structured with two
classes that receive different proportions of the interest and
principal distributions on a pool of mortgage assets. A common
type of stripped mortgage security will have one class receiving
some of the interest and most of the principal from the mortgage
assets, while the other class will receive most of the interest
and the remainder of the principal. In the most extreme case,
one class will receive all of the interest (the interest-only or
"IO" class), while the other class will receive all of the
principal (the principal-only or "PO" class). The yield to
maturity on an IO class is extremely sensitive not only to
changes in prevailing interest rates but also the rate of
principal payments (including prepayments) on the related
underlying mortgage assets, and a rapid rate of principal
payments may have a material adverse effect on the Series' yield
to maturity. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, the Series may
fail to fully recoup its initial investment in these securities
even if the securities are rated in a top rating category.
As interest rates rise and fall, the value of IOs tends to
move in the same direction as interest rates. The value of other
mortgage securities, like other debt instruments, will tend to
move in the opposite direction of interest rates. Accordingly,
investing in IOs, in conjunction with the other mortgage
securities described herein, may reduce fluctuations in a Series'
net asset value.
In addition to the stripped mortgage securities described
above, the Series listed above may invest in similar securities
such as "Super POs," "Levered IOs" and "IOettes," all of which
are more volatile than conventional POs or IOs. Risks associated
with instruments such as Super POs are similar in nature to those
risks related to investments in POs. Risks connected with
Levered IOs and IOettes are similar in nature to those associated
with IOs. The Series may also invest in other similar
instruments developed in the future that are deemed consistent
with the investment objectives, policies and restrictions of the
Series.
Under the Internal Revenue Code of 1986, as amended (the
"Code"), POs may generate taxable income from the current accrual
of original issue discount, without a corresponding distribution
of cash to the portfolio.
Swaps, Caps, Floors, Collars, Etc. - The Series listed above
may enter into interest rate, currency and index swaps, the
purchase or sale of related caps, floors and collars and other
derivatives. A Series will enter into these transactions
primarily to seek to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against
currency fluctuations, as a duration management technique or to
protect against any increase in the price of securities a
portfolio anticipates purchasing at a later date. A Series will
use these transactions for non-speculative purposes and will not
sell interest rate caps or floors if it does not own securities
or other instruments providing the income the portfolio may be
obligated to pay. Interest rate swaps involve the exchange by a
Series with another party of their respective commitments to pay
or receive interest (for example, an exchange of floating rate
payments for fixed rate payments with respect to a notional
amount of principal). The purchase of an interest rate cap
entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent
that a specified index exceeds a predetermined interest rate or
amount. The purchase of an interest rate floor entitles the
purchaser to receive payments of interest on a notional principal
amount from the party selling the interest rate floor to the
extent that a specified index falls below a predetermined
interest rate or amount. A collar is a combination of a cap and
a floor that preserves a certain return within a predetermined
range of interest rates or values. A currency swap is an
agreement to exchange cash flows on a notional amount based on
changes in the values of the reference currencies.
A Series will usually enter into interest rate swaps on a
net basis, that is, two payment streams are netted out in a cash
settlement on the payment date or dates specified in the
instrument, with the portfolio receiving or paying, as the case
may be, only the net amount of the two payments. To the extent
that a Series maintains in a segregated account with its
custodian assets sufficient to meet its obligations under swaps,
caps, floors, collars and other similar derivatives (see below)
these investments will not constitute senior securities under the
Investment Company Act of 1940 (the "1940 Act"), as amended, and,
thus, will not be treated as being subject to the Series'
borrowing restrictions. A Series will not enter into any swap,
cap, floor, collar or other derivative transaction unless the
counterparty is deemed creditworthy by that Series' subadviser.
If a counterparty defaults, the Series may have contractual
remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent
innovations for which standardized documentation has not yet been
fully developed and, for that reason, they are less liquid than
swaps.
The liquidity of swap agreements will be determined by a
Series' subadviser based on various factors, including (1) the
frequency of trades and quotations, (2) the number of dealers and
prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security
(including any demand or tender features), and (5) the nature of
the marketplace for trades (including the ability to assign or
offset a portfolio's rights and obligations relating to the
investment). Such determination will govern whether a swap will
be deemed to be within the 15% restriction on investments in
securities that are not readily marketable.
Each Series will maintain cash and appropriate liquid assets
in a segregated custodial account to cover its current
obligations under swap agreements. If a Series enters into a
swap agreement on a net basis, it will segregate assets with a
daily value at least equal to the excess, if any, of the Series'
accrued obligations under the swap agreement over the accrued
amount the Series is entitled to receive under the agreement. If
a Series enters into a swap agreement on other than a net basis,
it will segregate assets with a value equal to the full amount of
the Series' accrued obligations under the agreement.
Eurodollar Futures and Options - The Series listed above may
make investments in Eurodollar instruments, which are typically
dollar-denominated futures contracts or options on those
contracts that are linked to the London Interbank Offered Rate
("LIBOR"), although foreign currency denominated instruments are
available from time to time. Eurodollar futures contracts enable
purchasers to obtain a fixed rate for the lending of funds and
sellers to obtain a fixed rate for borrowings. A Series might
use Eurodollar futures contracts and options thereon to hedge
against changes in LIBOR, to which many interest rate swaps and
fixed income instruments are linked.
High Yield/High Risk Foreign Sovereign Debt Securities - The
Series listed above may invest in the sovereign debt of foreign
countries which have issued or have announced plans to issue
Brady Bonds, and expect that a substantial portion of their
investments in sovereign debt securities will consist of Brady
Bonds. Brady Bonds are debt securities issued under the
framework of the Brady Plan, an initiative announced by then U.S.
Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for
debtor nations to restructure their outstanding external
commercial bank indebtedness. In restructuring its external debt
under the Brady Plan framework, a debtor nation negotiates with
its existing bank lenders as well as multilateral institutions
such as the World Bank and the International Monetary Fund (the
"IMF"). The Brady Plan framework, as it has developed,
contemplates the exchange of commercial bank debt for newly
issued bonds (Brady Bonds). Brady Bonds may also be issued in
respect of new money being advanced by existing lenders in
connection with the debt restructuring. The World Bank and/or
the IMF support the restructuring by providing funds pursuant to
loan agreements or other arrangements which enable the debtor
nation to collateralize the new Brady Bonds or to repurchase
outstanding bank debt at a discount. Under these arrangements
with the World Bank or the IMF, debtor nations have been required
to agree to the implementation of certain domestic monetary and
fiscal reforms. Such reforms have included the liberalization of
trade and foreign investment, the privatization of state-owned
enterprises and the setting of targets for public spending and
borrowing. These policies and programs seek to promote the
debtor country's economic growth and development. Investors
should recognize that the Brady Plan only sets forth general
guiding principles for economic reform and debt reduction,
emphasizing that solutions must be negotiated on a case-by-case
basis between debtor nations and their creditors. Investors
should recognize that Brady Bonds have been issued only recently,
and accordingly do not have a long payment history.
Agreements implemented under the Brady Plan to date are
designed to achieve debt and debt-service reduction through
specific options negotiated by a debtor nation with its
creditors. As a result, the financial packages offered by each
country differ. The types of options have included the exchange
of outstanding commercial bank debt for bonds issued at 100% of
face value of such debt, which carry a below-market stated rate
of interest (generally known as par bonds), bonds issued at a
discount from face value of such debt (generally known as
discount bonds), bonds bearing an interest rate which increases
over time and bonds issued in exchange for the advancement of new
money by existing lenders. Regardless of the stated face amount
and stated interest rate of the various types of Brady Bonds, a
Series will purchase Brady Bonds in secondary markets, as
described below, in which the price and yield to the investor
reflect market conditions at the time of purchase. Brady Bonds
issued to date have traded at a deep discount from their face
value. Certain Brady Bonds have been collateralized as to
principal due at maturity (typically 30 years from the date of
issuance) by U.S. Treasury zero coupon bonds with a maturity
equal to the final maturity of such Brady Bonds, although the
collateral is not available to investors until the final maturity
of the Brady Bonds. Collateral purchases are financed by the
IMF, the World Bank and the debtor nations' reserves. In
addition, interest payments on certain types of Brady Bonds may
be collateralized by cash or high-grade securities in amounts
that typically represent between 12 and 18 months of interest
accruals on these instruments with the balance of the interest
accruals being uncollateralized. A Series may purchase Brady
Bonds with no or limited collateralization, and will be relying
for payment of interest and (except in the case of principal
collateralized Brady Bonds) principal primarily on the
willingness and ability of the foreign government to make payment
in accordance with the terms of the Brady Bonds. Brady Bonds
issued to date are purchased and sold in secondary markets
through U.S. securities dealers and other financial institutions
and are generally maintained through European transnational
securities depositories.
Futures and Options
Futures Contracts. A futures contract is an agreement
between two parties to buy and sell a commodity or financial
instrument (e.g., an interest-bearing security, a currency or, in
the case of futures contracts on the S&P 500 Index, the value of
the basket of securities comprising the Index) for a specified
price on a specified future date. In the case of futures on an
index, the seller and buyer agree to settle in cash, at a future
date, based on the difference in value of the contract between
the date it is opened and the settlement date. The value of each
contract is equal to the value of the index from time to time
multiplied by a specified dollar amount. For example, long-term
municipal bond index futures trade in contracts equal to $1000
multiplied by the Bond Buyer Municipal Bond Index.
When a trader, such as a Series, enters into a futures
contract, it is required to deposit with (or for the benefit of)
its broker, as "initial margin," an amount of cash or short-term
high-quality securities (such as U.S. Treasury Bills) equal to
approximately 2% to 20% of the delivery or settlement price of
the contract (depending on applicable exchange rules). Initial
margin is held to secure the performance of the holder of the
futures contract. As the value of the contract changes, the
value of futures contract positions increases or declines. At
the end of each trading day, the amount of such increase or
decline is received or paid respectively by and to the holders of
these positions. The amount received or paid is known as
"variation margin" or "maintenance margin." A Series with a long
position in a futures contract will establish a segregated
account with the Series' custodian containing cash or certain
liquid assets equal to the purchase price of the contract (less
any margin on deposit). For short positions in futures
contracts, a Series will establish a segregated account with the
custodian with cash or high grade liquid debt assets that, when
added to the amounts deposited as margin, equal the market value
of the instruments or currency underlying the futures contracts.
Although futures contracts by their terms may require actual
delivery and acceptance of securities, in most cases the
contracts are closed out before settlement. Closing out a
futures sale is effected by purchasing a futures contract for the
same aggregate amount of the specific type of financial
instrument or commodity and with the same delivery date.
Similarly, the closing out of a futures purchase is effected by
the purchaser selling an offsetting futures contract.
Gain or loss on a futures position is equal to the net
variation margin received or paid over the time the position is
held, plus or minus the amount received or paid when the position
is closed, minus brokerage commissions.
The Westpeak Stock Index Series may purchase and sell
futures contracts on the S&P 500 Index solely for the purpose of
reducing the risk of tracking error arising from holding cash
from new investments in the Series or in anticipation of
shareholder redemptions. The Back Bay Advisors Managed Series
may purchase and sell futures contracts on interest-bearing
securities or indices thereof, or on indices of stock prices
(such as the S&P 500 Index), to increase or decrease its
portfolio exposure to common stocks or to increase or decrease
its portfolio exposure to notes and bonds. The Westpeak Value
Growth Series may engage in transactions in futures contracts
solely for the purpose of maintaining full exposure of the
portfolio to the movements of broad equity markets at times when
the Series holds a cash position pending investment in stocks or
in anticipation of redemptions.
Options. An option on a futures contract obligates the
writer, in return for the premium received, to assume a position
in a futures contract (a short position if the option is a call
and a long position if the option is a put), at a specified
exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the futures position by
the writer of the option to the holder of the option generally
will be accompanied by delivery of the accumulated balance in the
writer's futures margin account, which represents the amount by
which the market price of the futures contract, at exercise,
exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. The premium paid by the
purchaser of an option will reflect, among other things, the
relationship of the exercise price to the market price and
volatility of the underlying contract, the remaining term of the
option, supply and demand and interest rates. Options on futures
contracts traded in the United States may only be traded on a
United States board of trade licensed by the Commodity Futures
Trading Commission.
An option on a security entitles the holder to receive (in
the case of a call option) or to sell (in the case of a put
option) a particular security at a specified exercise price. An
"American style" option allows exercise of the option at any time
during the term of the option. A "European style" option allows
an option to be exercised only at the end of its term. Options
on securities may be traded on or off a national securities
exchange.
A call option on a futures contract written by a Series is
considered by the Series to be covered if the Series owns the
security subject to the underlying futures contract or other
securities whose values are expected to move in tandem with the
values of the securities subject to such futures contract, based
on historical price movement volatility relationships. A call
option on a security written by a Series is considered to be
covered if the Series owns a security deliverable under the
option. A written call option is also covered if the Series
holds a call on the same futures contract or security as the call
written where the exercise price of the call held (a) is equal to
or less than the exercise price of the call written or (b) is
greater than the exercise price of the call written if the
difference is maintained by the Series in cash, Treasury bills or
other high grade liquid obligations in a segregated account with
its custodian.
A put option on a futures contract written by a Series, or a
put option on a security written by a Series, is covered if the
Series maintains cash, U.S. Treasury bills or other high-grade
liquid debt obligations with a value equal to the exercise price
in a segregated account with the Series' custodian, or else holds
a put on the same futures contract (or security, as the case may
be) as the put written where the exercise price of the put held
is equal to or greater than the exercise price of the put
written.
If the writer of an option wishes to terminate its position,
it may effect a closing purchase transaction by buying an option
identical to the option previously written. The effect of the
purchase is that the writer's position will be canceled.
Likewise, the holder of an option may liquidate its position by
selling an option identical to the option previously purchased.
Closing a written call option will permit the Series to
write another call option on the portfolio securities used to
cover the closed call option. Closing a written put option will
permit the Series to write another put option secured by the
segregated cash, U.S. Treasury bills or other high-grade liquid
obligations used to secure the closed put option. Also,
effecting a closing transaction will permit the cash or proceeds
from the concurrent sale of any futures contract or securities
subject to the option to be used for other Series investments.
If a Series desires to sell particular securities covering a
written call option position, it will close out its position or
will designate from its portfolio comparable securities to cover
the option prior to or concurrent with the sale of the covering
securities.
The Series will realize a profit from closing out an option
if the price of the offsetting position is less than the premium
received from writing the option or is more than the premium paid
to purchase the option; the Series will realize a loss from
closing out an option transaction if the price of the offsetting
option position is more than the premium received from writing
the option or is less than the premium paid to purchase the
option. Because increases in the market price of a call option
will generally reflect increases in the market price of the
covering securities, any loss resulting from the closing of a
written call option position is expected to be offset in whole or
in part by appreciation of such covering securities.
Since premiums on options having an exercise price close to
the value of the underlying securities or futures contracts
usually have a time value component (i.e. a value that diminishes
as the time within which the option can be exercised grows
shorter) an option writer may profit from the lapse of time even
though the value of the futures contract (or security in some
cases) underlying the option (and of the security deliverable
under the futures contract) has not changed. Consequently,
profit from option writing may or may not be offset by a decline
in the value of securities covering the option. If the profit is
not entirely offset, the Series will have a net gain from the
options transaction, and the Series' total return will be
enhanced. Likewise, the profit or loss from writing put options
may or may not be offset in whole or in part by changes in the
market value of securities acquired by the Series when the put
options are closed.
An over-the-counter option (an option not traded on a
national securities exchange) may be closed out only with the
other party to the original option transaction. While a Series
will seek to enter into over-the-counter options only with
dealers who agree to or are expected to be capable of entering
into closing transactions with the Series, there can be no
assurance that the Series will be able to liquidate an over-the-
counter option at a favorable price at any time prior to its
expiration. Accordingly, the Series might have to exercise an
over-the-counter option it holds in order to realize any profit
thereon and thereby would incur transactions costs on the
purchase or sale of the underlying assets. If the Series cannot
close out a covered call option written by it, it will not be
able to sell the underlying security until the option expires or
is exercised. Furthermore, over-the-counter options are not
subject to the protections afforded purchasers of listed options
by the Options Clearing Corporation or other clearing
organization.
The staff of the Securities and Exchange Commission (the
"SEC") has taken the position that over-the-counter options on
U.S. Government Securities and the assets used as cover for
written over-the-counter options on U.S. Government Securities
should generally be treated as illiquid securities. However, if
a dealer recognized by the Federal Reserve Bank of New York as a
"primary dealer" in U.S. Government Securities is the other party
to an option contract written by a mutual fund such as a Series,
and such Series has the absolute right to repurchase the option
from the dealer at a formula price established in a contract with
the dealer, the SEC staff has agreed that the Series only needs
to treat as illiquid that amount of the "cover" assets equal to
the amount by which (i) the formula price exceeds (ii) any amount
by which the market value of the securities subject to the
options exceeds the exercise price of the option (the amount by
which the option is "in-the-money").
Risks Related to Futures and Options. The use of futures
contracts and options involves risks. One risk arises because of
the imperfect correlation between movements in the price of
futures contracts or options and movements in the price of the
underlying securities or index. The Series' use of futures
contracts or options will not be fully effective unless the
Series can compensate for such imperfect correlation. There is
no assurance that the Series will be able to effect such
compensation.
The correlation between the price movement of a futures
contract or option and the related security (or index) may be
distorted due to differences in the nature of the markets. If
the price of the futures contract or option moves more than the
price of the security or index, the Series would experience
either a loss or a gain on the future or option that is not
completely offset by movements in the price of the security or
index. In an attempt to compensate for imperfect price movement
correlations, a Series may purchase or sell futures contracts or
options in a greater amount than the related securities or index
position if the volatility of the related securities or index is
historically greater than the volatility of the futures contracts
or options. Conversely, the Series may purchase or sell fewer
contracts or options if the volatility of the price of the
securities or index is historically less than that of the
contracts or options.
There are many reasons why changes in the values of futures
contracts or options may not correlate perfectly with changes in
the value of the underlying security of index. For example, all
participants in the futures market are subject to margin deposit
and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures
contracts through offsetting transactions, which could distort
the normal relationship between the index and futures markets.
Secondly, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market, and as
a result the futures market may attract more speculators than
does the securities market. In addition, trading hours for index
futures or options may not correspond perfectly to hours of
trading on the exchange where the underlying securities trade.
This may result in a disparity between the price of futures or
options and the value of the underlying security or index due to
the lack of continuous arbitrage between the futures or options
price and the value of the underlying security or index. Hedging
transactions using securities indices also involve the risk that
movements in the price of the index may not correlate with price
movements of the particular portfolio securities being hedged
(since a Series will typically not own all of the securities
included in a particular index.)
Price movement correlation also may be distorted by the
limited liquidity of certain futures or options markets and the
participation of speculators in such markets. If an insufficient
number of contracts are traded, commercial users may not deal in
futures contracts or options because they do not want to assume
the risk that they may not be able to close out their positions
within a reasonable amount of time. In such instance, futures
and options market prices may be driven by different forces than
those driving the market in the underlying securities, and price
spreads between these markets may widen. The participation of
speculators in the market generally enhances its liquidity.
Nonetheless, speculative trading spreads between futures markets
may create temporary price distortions unrelated to the market in
the underlying securities.
Positions in futures contracts and related options are
established or closed out only on an exchange or board of trade
regulated by the Commodity Futures Trading Commission. There is
no assurance that a liquid market on an exchange or board of
trade will exist for any particular contract or at any particular
time. The liquidity of markets in futures contracts may be
adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of
fluctuation in a futures price during a single trading day. Once
the daily limit has been reached in a contract, no trades may be
entered into at a price beyond the limit, which may prevent the
liquidation of open futures positions. Prices have in the past
exceeded the daily limit on a number of consecutive trading days.
If there is not a liquid market at a particular time, it may not
be possible to close a futures position at such time, and, in the
event of adverse price movements, the Series would continue to be
required to make daily cash payments of variation margin.
However, if futures or options are used to hedge portfolio
securities, an increase in the price of the securities, if any,
may partially or completely offset losses on the futures
contract.
An exchange-traded option may be closed out only on a
national securities or commodities exchange which generally
provides a liquid secondary market for an option of the same
series. If a liquid secondary market for an exchange-traded
option does not exist, it might not be possible to effect a
closing transaction with respect to a particular option, with the
result that the Series would have to exercise the option in order
to realize any profit. If the Series that has written an option
is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon
exercise. Reasons for the absence of a liquid secondary market
on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii)
restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading
halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying
securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of
an exchange or the Options Clearing Corporation or other clearing
organization may not at all times be adequate to handle current
trading volume or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that
exchange (or in that class or series of options) would cease to
exist, although outstanding options on that exchange that had
been issued by the Options Clearing Corporation as a result of
trades on that exchange would continue to be exercisable in
accordance with their terms.
Because the specific procedures for trading foreign futures
and options on futures exchanges are still evolving, additional
or different margin requirements as well as settlement procedures
may be applicable to foreign futures and options at the time the
Series purchases foreign futures or options.
The successful use of transactions in futures and options
depends in part on the ability of the Series to forecast
correctly the direction and extent of interest rate or securities
price movements within a given time frame. To the extent
interest rates or securities prices move in a direction opposite
to that anticipated, a Series may realize a loss that is not
fully or partially offset by an increase in the value of
portfolio securities. In addition, whether or not interest rates
or securities prices move during the period that the Series holds
futures or options positions, the Series will pay the cost of
taking those positions (i.e., brokerage costs). As a result, the
Series' total return for such period may be less than if it had
not engaged in the futures or option transaction.
Future Developments. The above discussion relates to the
Series' proposed use of futures contracts, options and options on
futures contracts currently available. The relevant markets and
related regulations are still in the developing stage. In the
event of future regulatory or market developments, the Series may
also use additional types of futures contracts or options and
other similar or related investment techniques.
Foreign Currency Hedging Transactions - To protect against a
change in the foreign currency exchange rate between the date on
which a Series contracts to purchase or sell a security that
settles in a foreign currency and the settlement date for the
purchase or sale, or to "lock in" the equivalent of a dividend or
interest payment in another currency, the Series might purchase
or sell a foreign currency on a spot (or cash) basis at the
prevailing spot rate. If conditions warrant, a Series may also
enter into contracts with banks or broker-dealers to purchase or
sell foreign currencies at a future date ("forward contracts").
The Series will maintain cash or high-quality debt obligations in
a segregated account with the custodian in an amount at least
equal to (i) the difference between the current value of the
Series' liquid holdings that settle in the relevant currency and
the Series' outstanding net obligations under currency forward
contracts in that currency, or (ii) the current amount, if any,
that would be required to be paid to enter into an offsetting
forward currency contract which would have the effect of closing
out the original forward contract. The Series' use of currency
hedging transactions may be limited by tax considerations. The
Series may also purchase or sell foreign currency futures
contracts traded on futures exchanges. Foreign currency futures
contract transactions involve risks similar to those of other
futures transactions. See "Futures and Options," above.
DETERMINATION OF NET ASSET VALUES
As described in the text of the Prospectus following the
caption "Net Asset Values and Portfolio Valuation," the value of
each Series' portfolio assets is determined by that Series'
adviser (subadviser, in the case of Series that have a
subadviser). The net asset value of each Series' shares is
determined as of the close of regular trading on the New York
Stock Exchange on each day the New York Stock Exchange is open
and there is a sufficient degree of trading in a Series'
portfolio securities that the current net asset value of a
Series' shares is materially affected. The New York Stock
Exchange is currently expected to be closed on weekend days and
on the following holidays each year: New Year's Day, Presidents
Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Expenses of each Series are
paid or accrued each day.
Loomis Sayles Small Cap, Draycott International Equity, Alger
Equity Growth, Capital Growth, Loomis Sayles Avanti Growth,
Venture Value, Westpeak Value Growth, Westpeak Stock Index,
Loomis Sayles Balanced, Salomon Brothers Strategic Bond
Opportunities, Salomon Brothers U.S. Government Series
As described in the text of the Prospectus following the
caption "Net Asset Values and Portfolio Valuation," each of the
Series listed above values its portfolio securities (other than
fixed-income securities maturing in 60 days or less, which are
valued using the amortized cost method) at market value where
current market quotations are readily available and otherwise
values them at fair value as determined in good faith by the
Trustees or by the particular Series' adviser or subadviser under
the supervision of the Board of Trustees. Each of the advisers
and subadvisers has been authorized to delegate certain price
determinations to pricing services or facilities which they
select. Securities traded on a national securities exchange or
exchanges are valued at their last sale price on the principal
exchange or, if there is no reported sale during the day, and in
the case of over-the-counter securities, at the last reported bid
price estimated by a broker.
Back Bay Advisors Managed Series
Equity securities traded on a national securities exchange
or exchanges are valued at their last sale price on the principal
exchange or, if there is no reported sale during the day, and in
the case of over-the-counter securities, at the last bid price.
Debt securities are valued at market value where current market
quotations are readily available. Where current market
quotations are not readily available, a pricing service selected
by Back Bay Advisors, acting pursuant to the authorization of the
Board of Trustees, values the securities at fair value. The
pricing service employed will be one that determines valuations
of normal institutional-sized trading units of long-term debt
securities. Such valuations are determined by using methods
based on market transactions for comparable securities and on
various relationships between securities which are generally
recognized by institutional traders. Other securities for which
current market quotations are not readily available (including
restricted securities, if any) and all other assets are taken at
fair value as determined in good faith by Back Bay Advisors
acting under the supervision of the Board of Trustees, although
the actual calculations may be made by a pricing service selected
by Back Bay Advisors acting pursuant to the direction of the
Board.
Back Bay Advisors Bond Income Series
As described in the text of the Prospectus following the
caption "Net Asset Values and Portfolio Valuation," the Back Bay
Advisors Bond Income Series values certain portfolio securities
(other than fixed-income securities maturing in 60 days or less,
which are valued using the amortized cost method) at market value
where current market quotations are readily available. Where
current market quotations are not readily available, a pricing
service selected by Back Bay Advisors, pursuant to the
authorization of the Board of Trustees, values the securities at
fair value. The pricing service employed will be one that
determines valuations of normal institutional-sized trading units
of long-term debt securities. Such valuations are determined by
using methods based on market transactions for comparable
securities and on various relationships between securities which
are generally recognized by institutional traders. Other
securities for which current market quotations are not readily
available (including restricted securities, if any) and all other
assets are taken at fair value as determined in good faith by
Back Bay Advisors acting under the supervision of the Board of
Trustees, although the actual calculations may be made by a
pricing service selected by Back Bay Advisors acting pursuant to
the direction of the Board. Securities traded on a national
securities exchange or exchanges are valued at their last sale
price on the principal exchange, or if there is no reported sale,
and in the case of over-the-counter securities, at a bid price
estimated by a broker.
Back Bay Advisors Money Market Series
As described in the text of the Prospectus following the
caption "Net Asset Values and Portfolio Valuation," the portfolio
of the Back Bay Advisors Money Market Series will be valued at
amortized cost. Under the amortized cost method of valuation,
securities are valued at cost on the date of purchase.
Thereafter the values of securities purchased at a discount or
premium are increased or decreased incrementally each day so that
at maturity the purchase discount or premium is fully amortized
and the value of the security is equal to its principal amount.
Due to fluctuations in interest rates, the amortized cost value
of the securities of the Back Bay Advisors Money Market Series
may at times be more or less than their market value.
By using amortized cost valuation, the Back Bay Advisors
Money Market Series seeks to maintain a constant net asset value
of $100 per share despite minor shifts in the market value of its
portfolio securities. The yield on a shareholder's investment
may be more or less than that which would be recognized if the
net asset value per share of the Back Bay Advisors Money Market
Series were not constant and were permitted to fluctuate with the
market value of the portfolio securities of the Back Bay Advisors
Money Market Series. However, as a result of the following
procedures, the Fund believes any difference will normally be
minimal. Quarterly, the Trustees monitor the deviation between
the net asset value per share of the Back Bay Advisors Money
Market Series as determined by using available market quotations
and its amortized cost price per share. Back Bay Advisors makes
such comparisons at least weekly and will advise the Trustees
promptly in the event of any significant deviation. If the
deviation exceeds 1/2 of 1% for the Back Bay Advisors Money
Market Series, the Board of Trustees will consider what action,
if any, should be initiated to provide fair valuation of the
portfolio securities of the Back Bay Advisors Money Market Series
and prevent material dilution or other unfair results to
shareholders. Such action may include selling portfolio
securities prior to maturity; withholding dividends; or utilizing
a net asset value per share as determined by using available
market quotations.
FUND PERFORMANCE
Calculations of Yield and Return
Yield of the Back Bay Advisors Bond Income Series, the
Salomon Brothers U.S. Government Series and the Salomon Brothers
Strategic Bond Opportunities Series. As summarized in the
Prospectus under the caption "Performance Information," the yield
of each of these Series will be computed in accordance with the
SEC's standardized formula by annualizing net investment income
per share for a recent 30-day period and dividing that amount by
a share's net asset value (reduced by any earned income expected
to be declared shortly as a dividend) on the last trading day of
that period. Net investment income will reflect amortization of
any market value premium or discount of fixed-income securities
(except for obligations backed by mortgages or other assets) and
may include recognition of a pro rata portion of the stated
dividend rate of dividend paying portfolio securities.
These Series' yield will vary from time to time depending
upon market conditions, the composition of the Series' portfolio
and the operating expenses of the Series. These factors and
possible differences in the methods used in calculating yield
should be considered when comparing the Back Bay Advisors Bond
Income Series' yield to yields published for other investment
companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Series' shares
and to the relative risks associated with the investment
objectives and policies of the Series. Yield information may be
useful in reviewing such Series' performance and providing a
basis for comparison with other investment alternatives, although
the yields of the Series do not take into account any of the fees
imposed in connection with the purchase of variable insurance
contracts offered by New England Variable Life Insurance Company
("NEVLICO") or variable annuity contracts offered by NEVLICO or
New England Life Insurance Company ("The New England"). Yield
may be stated with or without giving effect to any expense
limitations in effect for the Series.
At any time in the future, yields may be higher or lower
than past yields and there can be no assurance that any
historical results will continue.
Investors are specifically advised that share prices,
expressed as the net asset value per share, will vary just as
yields will vary. An investor's focus on the yield of a Series
to the exclusion of consideration of the share price may result
in the investor's misunderstanding the total return he or she may
derive from the Series.
Yield of the Back Bay Advisors Money Market Series. The
Back Bay Advisors Money Market Series' yield represents the net
change, exclusive of capital changes, in the value of a
hypothetical account having a balance of one share at the
beginning of the period for which yield is determined (the "base
period"). Current yield for the base period (for example, seven
calendar days) is calculated by dividing (i) the net change in
the value of the account for the base period by (ii) the number
of days in the base period. The resulting number is then
multiplied by 365 in order to determine such net change on an
annualized basis. This amount is divided by the value of the
account as of the beginning of the base period, normally $100, in
order to state the current yield as a percentage. Yield may also
be calculated on an "effective" or a "compound" basis, which
assumes continual reinvestment throughout an entire year of net
income earned at the same rate as net income is earned by the
account for the base period. Yield is calculated without regard
to realized and unrealized gains and losses. The yield of the
Back Bay Advisors Money Market Series will vary depending on
prevailing interest rates, the operating expenses of the Series
and the quality, maturity and type of instruments held in the
portfolio of that Series. Yield information may be useful in
reviewing such Series' performance and providing a basis for
comparison with other investment alternatives, although the yield
of the Back Bay Advisors Money Market Series does not take into
account any of the fees imposed in connection with the purchase
of variable insurance contracts offered by NEVLICO or variable
annuity contracts offered by NEVLICO or The New England.
However, unlike certain bank deposits or other investments which
pay a fixed yield for a stated period of time, money market fund
yields fluctuate. Consequently no yield quotation should be
considered as representative of what the yield of the Back Bay
Advisors Money Market Series may be for any specified period in
the future.
Calculation of Total Return. As summarized in the
Prospectus under the heading "Performance Information," total
return is a measure of the change in value of an investment in a
Series over the period covered, which assumes that any dividends
or capital gain distributions are automatically reinvested in the
Series rather than paid to the investor in cash. Total return
may be higher or lower than past performance and there can be no
assurance that any historical results will continue.
The formula for total return used by a Series includes three
steps: (1) adding to the total number of shares purchased by a
hypothetical $1,000 investment in a Series all additional shares
that would have been purchased if all dividends and distributions
paid or distributed during the period had been automatically
reinvested; (2) calculating the value of the hypothetical initial
investment as of the end of the period by multiplying the total
number of shares owned at the end of the period by the net asset
value per share on the last trading day of the period; and (3)
dividing this account value for the hypothetical investor by the
amount of the initial investment and annualizing the result for
periods of less than one year. Total return reflects the bearing
or deferral of certain expenses by The New England and its
affiliates (see "Allocation of Expenses" below). Total return
would be lower for these Series if these expense arrangements had
not been in effect. Total return does not reflect charges
assessed against the insurance company separate accounts or the
variable life insurance or variable annuity products for which
the Fund serves as an investment vehicle. Total return may be
stated alone or may be accompanied by investment return
information for those separate accounts or the variable life
insurance or variable annuity products.
Performance Comparisons
Yield and Total Return. Each Series may, from time to time,
include its total return in advertisements or in other written
information furnished to present and prospective owners of the
variable life insurance and variable annuity contracts supported
by the Fund. The Back Bay Advisors Bond Income Series, the
Salomon Brothers U.S. Government Series, the Salomon Brothers
Strategic Bond Opportunities Series and the Back Bay Advisors
Money Market Series may, from time to time, also include their
yield in such advertisements or other written information. These
results may include comparisons to the yields of money market
funds reporting to IBC/Donoghue's Money Fund Report ("Donoghue's
Report"). In addition, each Series may, from time to time,
provide a ranking of such performance figures relative to similar
figures for mutual funds whose performance has been monitored by
Lipper Analytical Services, Inc. ("Lipper"). Performance
information about a Series is based on the Series' past
performance and is not intended to indicate future performance.
Donoghue's Report is an independent service that collects
data from over 1,000 money market funds weekly and reports on the
assets, 7- and 30-day yields, 12-month yields, average maturities
and portfolio breakdowns of such funds. 12-month yields
represent total return assuming reinvestment of dividends for up
to one year.
The Lipper is an independent service that monitors the
performance of over 750 variable annuity and variable life mutual
funds, calculates total return and, in some cases, yield for such
funds.
Total return (and yield in the case of the Back Bay Advisors
Bond Income Series, the Back Bay Advisors Money Market Series,
the Salomon Brothers U.S. Government Series and the Salomon
Brothers Strategic Bond Opportunities Series) may also be used to
compare the performance of a Series against certain widely
acknowledged standards or indices for stock and bond market
performance, including, but not limited to, the S&P 500 Index,
the Dow Jones Industrial Average, the Lehman Government/Corporate
Bond Index, the Lehman Intermediate Government/Corporate Bond
Index, the S&P/BARRA Growth Index, the S&P/BARRA Value Index, the
Lipper Variable Balanced Fund Average, the Lipper Variable Growth
and Income Average, the Lipper Variable A-Rated Corporate Bond
Fund Average, the Lipper Variable Flexible Portfolio Fund
Average, the Lipper Variable General Bond Fund Average, the
Lipper Variable Growth Fund Average, the Lipper Variable
International Fund Average, the Lipper Variable Intermediate
Investment Grade Debt Fund Average, the Lipper Variable Small
Company Fund Average, the Lipper Variable S&P 500 Index Fund
Average, the Lipper Variable U.S. Mortgage and GNMA Fund Average,
the Russell 2000 Index, the Lehman Brothers Aggregate Bond Index,
the Lehman Brothers Intermediate Government Bond Index and the
Morgan Stanley Capital International Europe, Australia, Far East
Index, or against the U.S. Bureau of Labor Statistics' Consumer
Price Index.
The S&P 500 Index is a market value-weighted and unmanaged
index showing the changes in the aggregate market value of 500
stocks relative to the base period 1941-43. The S&P 500 Index is
composed almost entirely of common stocks of companies listed on
the New York Stock Exchange, although the common stocks of a few
companies listed on the American Stock Exchange or traded over-
the-counter are included. The 500 companies represented include
385 industrial, 15 transportation, 55 financial services and 45
utilities concerns.
The Dow Jones Industrial Average ("DJIA") is a market value-
weighted and unmanaged index of 30 large industrial stocks traded
on the New York Stock Exchange.
The Lehman Government/Corporate Bond Index is a measure of
the market value of approximately 5,300 bonds with a face value
currently in excess of $1.3 trillion. To be included in the
Lehman Government/Corporate Bond Index, an issue must have
amounts outstanding in excess of $1 million, have at least one
year to maturity and be rated "Baa" or higher ("investment
grade") by a nationally recognized rating agency.
The Lehman Intermediate Government/Corporate Bond Index is
an unmanaged index of investment grade bonds issued by the U.S.
Government and U.S. corporations having maturities between one
and ten years.
The Consumer Price Index, published by the U.S. Bureau of
Labor Statistics, is a statistical measure of changes, over time,
in the prices of goods and services in major expenditure groups.
The S&P/BARRA Growth Index is an unmanaged index of more
than 150 large capitalization stocks that have high historical
earnings growth and predicted above average earnings growth. The
S&P/BARRA Value Index is an unmanaged index of more than 300
large capitalization stocks characterized by low price-to-book
ratios, high yield and low price-to-earnings ratios. Both the
S&P/BARRA Growth Index and the S&P/BARRA Value Index are compiled
by BARRA.
The Lipper Variable Balanced Fund Average is a measure of
the performance of the largest open-end balanced mutual funds.
The Lipper Variable Growth and Income Average represents a
grouping of funds underlying annuity products which have growth
and income as their investment objectives.
The Lipper Variable A-Rated Corporate Bond Fund Average is
an average of the total return performance (calculated on net
asset value) of funds with similar investment objectives as
calculated by Lipper Analytical Services.
Lipper Variable Flexible Portfolio Fund Average is an
average of the total return performance (calculated on net asset
value) of funds with similar investment objectives as calculated
by Lipper Analytical Services.
The Lipper Variable General Bond Fund Average is an average
of the total return performance (calculated on net asset value)
of funds with similar investment objectives as calculated by
Lipper Analytical Services.
Lipper Variable Growth Fund Average is an average of the
total return performance (calculated on net asset value) of funds
with similar investment objectives as calculated by Lipper
Analytical Services.
The Lipper Variable International Fund Average is an average
of the total return performance (calculated on net asset value)
of funds with similar investment objectives as calculated by
Lipper Analytical Services.
The Lipper Variable Intermediate Investmnet Grade Debt Fund
Average is an average of the total return performance (calculated
on net asset value) of funds with similar investment objectives
as calculated by Lipper Analytical Services.
The Lipper Variable Small Company Fund Average is an average
of the total return performance (calculated on net asset value)
of funds with similar investment objectives as calculated by
Lipper Analytical Services.
The Lipper Variable S&P 500 Index Fund Average is an average
of the total return performance (calculated on net asset value)
of funds with similar investment objectives as calculated by
Lipper Analytical Services.
The Lehman Brothers Aggregate Bond Index is an index which
includes most obligations of the U.S. Treasury, agencies and
quasi-federal corportions, most publicly issued investment grade
corporate bonds, and most bonds backed by mortgage pools of GNMA,
FNMA and FHLMC.
The Lehman Brothers Intermediate Government Bond Index is an
index which includes most obligations of the U.S. Treasury,
agencies and quasi-federal corporations having maturities of one
to ten years.
The Russell 2000 Index is an index which consists of 2000
small market capitalization stocks having an average market cap
of $160 million.
The Morgan Stanley Capital International Europe, Australia,
Far East Index is an arithmetical average (weighted by market
value) of the performance (in U.S. dollars) of 1,036 companies
representing the stock markets of Europe, Australia, New Zealand
and the Far East.
From time to time, articles about a Series regarding
performance, rankings and other Series characteristics may appear
in national publications including, but not limited to, the Wall
Street Journal, Forbes, Fortune, CDA Investment Technologies and
Money Magazine (see Appendix B). In particular, some or all of
these publications may publish their own rankings or performance
reviews of mutual funds, including the Fund. References to or
reprints or portions of reprints of such articles, which may be
include rankings that list the names of other funds and their
performance, may be used as Fund or variable contract sales
literature or advertising material.
The following table presents certain total return
information for certain Series and certain indexes and averages
for periods ended December 31, 1995:
Total
Total Return
Return For the 5-
For The Year 5-Year 10-Year
Year Period Average Average
Ended Ended Annual Annual
Dec. 31, Dec. 31, Total Total
1995 1995 Return Return
Loomis Sayles
Small Cap Series 28.9% -- -- --
Draycott
International 6.0% -- -- --
Equity Series
Alger Equity
Growth Series 48.7% -- -- --
Capital Growth 38.0% 113.4% 16.4% 22.0%
Series
Loomis Sayles
Avanti Growth 30.4% -- -- --
Series
Venture Value 39.3% -- -- --
Series
Westpeak Value
Growth Series 36.5% -- -- --
Westpeak Stock
Index Series 36.9% 112.6% 16.3% --
Loomis Sayles
Balanced Series 24.8% -- -- --
Back Bay Advisors
Managed Series 31.3% 84.2% 13.0% --
Salomon Brothers
Strategic Bond
Opportunities
Series 19.4% -- -- --
Back Bay Advisors
Bond Income 21.2% 68.3% 11.0% 10.0%
Series
Salomon Brothers
U.S. Government 15.0% -- -- --
Series
Back Bay Advisors
Money Market
Series 5.6% 24.7% 4.5% 6.1%
S & P 500 37.4% 115.3% 16.5% 14.8%
Lehman
Government/ 15.3% 51.1% 8.6% 8.8%
Corporate Index
Consumer Price 2.6% 14.8% 2.8% 3.5%
Index
DJIA 37.0% 124.4% 17.6% 16.4%
No brokerage commissions or other fees were factored into
the values of the S&P 500, which is an index of an unmanaged
group of common stocks. No adjustments have been made for a
shareholder's tax liability on dividends and capital gains
distributions.
Since commencing operations on May 1, 1994, the Loomis
Sayles Small Cap Series has made the following distributions of
income: on 12/28/94 $0.15 per share and on 12/29/95 $0.78 per
share. Over the same period, the Loomis Sayles Small Cap Series
had made the following distributions of realized capital gains:
none on 12/28/94 and on 12/29/95 $4.81 per share.
Since commencing operations on October 31, 1994, the
Draycott International Equity Series has made the following
distributions of income: on 12/28/94 $ 0.02 per share and on
12/29/95 $0.12 per share. Over the same period, the Draycott
International Equity Series has made the following distributions
of realized capital gains: on 12/28/94 and 12/29/95 no realized
capital gains, and paid-in capital of $0.01 and none,
respectively.
Since commencing operations on October 31, 1994, the Alger
Equity Growth Series has made the following distributions of
income: on 12/28/94 $0.02 per share and on 12/29/95 $0.01 per
share. Over the same period, the Alger Equity Growth Series has
made the following distributions of realized capital gains: on
12/28/94 no realized capital gains and on 12/29/95 $0.41 per
share.
Since inception, the Capital Growth Series has made the
following distributions of income: on 1/20/84 $0.21 per share; on
1/25/85 $1.12 per share; on 1/24/86 $0.90 per share; on 1/23/87
$0.44 per share; on 12/31/87 $0.66 per share; on 12/29/88 $9.55
per share; on 9/14/89 $0.13 per share; on 12/29/89 $2.59 per
share; on 12/28/90 $2.11 per share; on 12/27/91 $3.22 per share;
on 12/29/92 $4.07; on 12/29/93 $2.18 per share; on 12/28/94 $5.15
per share, and on 12/29/95 $3.48 per share. Over the same
period, the Capital Growth Series has made the following
distributions of realized capital gains: on 1/20/84 $0.49 per
share; on 1/24/86 $45.74 per share; on 1/23/87 $122.84 per share;
on 12/31/87 $19.59 per share; on 1/28/88 $0.30 per share; on
12/28/90 none; on 12/27/91 $32.37 per share; on 12/31/92 none;
on 12/29/93 $16.75 per share; on 7/22/94 $0.41 per share; on
12/28/94 $8.92 per share and on 12/29/95 $52.58 per share.
Since commencing the sale of shares to the public on April
30, 1993, the Loomis Sayles Avanti Growth Series has made the
following distributions of income: on 12/29/93 $0.175 per share;
on 12/28/94 $0.60 per share and on 12/29/95 $0.40 per share.
Over the same period, the Loomis Sayles Avanti Growth Series has
made the following distributions of realized capital gains: on
12/29/93 $0.885 per share; on 12/28/94 none and on 12/29/95 $4.15
per share.
Since commencing operations on October 31, 1994, the Venture
Value Series has made the following distributions of income: on
12/28/94 $0.03 per share and on 12/29/95 $0.10 per share. Over
the same period, the Series has made the following distributions
of realized capital gains: on 12/28/94 no realized capital gains
and on 12/29/95 $0.20 per share.
Since commencing the sale of shares to the public on April
30, 1993, the Westpeak Value Growth Series has made the following
distributions of income: on 12/29/93 $0.92 per share; on
12/28/94 $1.92 per share and on 12/29/95 $1.71 per share. Over
the same period, the Westpeak Value Growth Series has made the
following distributions of realized capital gains: on 12/29/93
$1.01 per share; on 12/28/94 no capital gains but a distribution
of paid-in capital was made on 12/28/94 of $0.02 per share and on
12/29/95 capital gains of $5.69 per share.
Since commencing the sale of shares to the public on May 1,
1987, the Westpeak Stock Index Series has made the following
distributions of income: on 12/31/87 $2.23 per share; on 12/29/88
$3.44 per share; on 12/27/89 $3.74 per share; on 12/28/90 $3.99
per share; on 12/27/91 $3.56 per share; on 12/29/92 $8.35 per
share; on 12/29/93 $1.54 per share; on 12/28/94 $1.82 per share
and on 12/29/95 $1.85 per share. Over the same period, the
Westpeak Stock Index Series has made the following distributions
of realized capital gains: on 12/31/87 $0.41 per share; on
12/29/88 $0.81 per share; on 12/27/89 $1.64 per share; on
12/28/90 none; on 1/29/91 $0.05; on 12/27/91 $0.39 per share; on
12/29/92 $67.41 per share; on 5/20/93 $0.29 per share; on
12/29/93 $0.695 per share and on 12/28/94 $0.16 per share and a
distribution of paid-in capital on 12/28/94 of $0.03 per share;
on 12/29/95 $1.18 per share.
Since commencing operations October 31, 1994, the Loomis
Sayles Balanced Series has made the following distributions of
income: on 12/28/94 $0.05 per share and on 12/29/95 $0.26 per
share. Over the same period, the Loomis Sayles Balanced Series
has made the following distributions of realized capital gains:
on 12/28/94 none and on 12/29/95 $0.19 per share.
Since commencing the sale of shares to the public on May 1,
1987, the Back Bay Advisors Managed Series has made the following
distributions of income: on 12/31/87 $2.73 per share; on 12/29/88
$5.24 per share; on 12/27/89 $4.22 per share; on 12/28/90 $5.52
per share; on 12/27/91 $6.41 per share; on 12/29/92 $5.13 per
share; on 5/20/93 $0.02 per share; on 12/29/93 $4.36 per share;
on 12/28/94 $5.38 per share and on 12/29/95 $6.57 per share.
Over the same period, the Back Bay Advisors Managed Series has
made the following distributions of realized capital gains: on
12/29/88 $0.38; on 12/27/89 $0.38; on 12/28/90 none; on 12/27/91
$1.15 per share; on 12/29/92 $1.07 per share; on 12/29/93 $2.65
per share; on 12/28/94 none; on 12/29/95 $0.88 per share.
Since commencing on October 31, 1994, the Salomon Brothers
Strategic Bond Opportunities Series has made the following
distributions of income: on 12/28/94 $ 0.12 per share and on
12/29/95 $0.55 per share. Over the same period, the Series has
made the following distributions of realized capital gains: on
12/28/94 no realized capital gains and on 12/29/95 $0.22 per
share.
Since inception, the Back Bay Advisors Bond Income Series
has made the following distributions of income: on 1/20/84 $3.76
per share; on 1/25/85 $11.60 per share; on 1/24/86 $11.09 per
share; on 1/23/87 $10.04 per share; on 12/31/87 $8.67 per share;
on 12/29/88 $10.70 per share; on 12/27/89 $6.91 per share; on
12/28/90 $7.46 per share; on 12/27/91 $9.47 per share; on
12/29/92 $6.87 per share; on 12/29/93 $6.25 per share; on
12/28/94 $7.05 per share and on 12/29/95 $7.05 per share. Over
the same period, the Back Bay Advisors Bond Income Series has
made the following distributions of realized capital gains: on
1/20/84 $0.11 per share; on 1/24/86 $1.67 per share; on 1/23/87
$11.10 per share; on 12/28/90 none; on 12/27/91 $2.13 per share;
on 12/29/92 $1.57 per share; on 12/29/93 $4.16 per share; on
12/28/94 none; and on 12/29/95 none.
Since commencing operations on October 31, 1994, the Salomon
Brothers U.S. Government Series has made the following
distributions of income: on 12/28/94 $ 0.10 per share and on
12/29/95 $0.33 per share. Over the same period, the Salomon
Brothers U.S. Government Series has made the following
distributions of realized capital gains: on 12/28/94 no realized
capital gains and on 12/29/95 $0.08 per share.
TRUSTEES AND OFFICERS
Trustees and officers of the Fund and their principal occupations
during the past five years or more are as follows:
NANCY HAWTHORNE -- Trustee; Pilot House, Lewis Wharf, Boston, MA
02110; Senior Vice President and Chief Financial Officer,
Continental Cablevision, Inc. (cable television operator);
formerly, Senior Vice President and Treasurer, Continental
Cablevision, Inc.; Director, Perini Corporation
(construction).
JOSEPH M. HINCHEY -- Trustee; 193 Wamphassue Road, Stonington,
Connecticut 06378; Retired; formerly, Senior Vice President-
Finance, Analog Devices, Inc. (manufacturer of electronic
devices); Trustee, Union College and Citizens Scholarship
Foundation of America, Inc.; Director, New England Security
Insurance and Chemet Corporation (manufacturer of
metallurgical products).
RICHARD S. HUMPHREY, JR. -- Trustee; 217 Waterways Avenue., P.O.
Box 518, Boca Grande, Florida 33921; Director, RYKA, Inc.
(manufacturer of athletic footwear for women); retired
Chairman of the Board, HBM/Creamer (advertising agency).
ROBERT B. KITTREDGE -- Trustee; 21 Sturdivant Street, Cumberland
Foreside, ME 04110; Retired; Trustee, CGM Trust and CGM
Capital Development Fund; formerly, Vice President, General
Counsel and Director, Loomis, Sayles & Company, Inc.
LAURENS MACLURE -- Trustee; 183 Sohier Street, Cohasset, MA
02025; Retired; Trustee, CGM Trust and CGM Capital
Development Fund; Director, Blue Cross of Massachusetts
(health insurance).
DALE ROGERS MARSHALL -- Trustee; 26 East Main Street, Norton, MA
02766; President, Wheaton College; formerly, Academic Dean,
Wellesley College.
JOSEPH F. TURLEY -- Trustee; 5680 N. AIA #304, Indian River
Shores, FL 32963; Retired; Director, The Gillette Company
(manufacturers of personal care products) and EG&G, Inc. (a
diversified technical company); formerly, President and Chief
Operating Officer, The Gillette Company.
FREDERICK K. ZIMMERMANN* -- Chairman of the Board, Chief
Executive Officer, President and Trustee; Chief Investment
Officer and Executive Vice President, The New England;
formerly, Senior Vice President, Vice President and
Controller, The New England; Chairman of the Board and
President, TNE Advisers, Inc.; Director and Vice President -
Investments, NEVLICO; Chairman of the Board and President,
New England Pension and Annuity Company.
ANNE M. GOGGIN* -- Senior Vice President and Trustee; Vice
President and Counsel, The New England; Vice President,
General Counsel, Secretary and Clerk, New England Securities
Corp.
G. KENNETH HEEBNER -- Senior Vice President; Associate, Capital
Growth Management Limited Partnership ("CGM").
ROBERT L. KEMP -- Senior Vice President; Associate, CGM.
GERALD H. SCRIVER -- Senior Vice President; President, Director
and Chief Executive Officer, Westpeak Investment Advisors, L.
P. ("Westpeak"); Senior Vice President, TNE Advisers, Inc.;
formerly Senior Vice President, INVESCO Funds Group.
_______________________________
* Trustee deemed an "interested person" of the Trust, as
defined in the Investment Company Act of 1940 (the "1940 Act").
CHARLES T. WALLIS -- Senior Vice President; President and Chief
Executive Officer, Back Bay Advisors, L.P.
MERI ANNE BECK -- Vice President; Vice President, Senior Partner
and Fixed Income Portfolio Manager, Loomis Sayles; formerly,
Senior Portfolio Manager and Investment Strategist, TSA
Capital Management.
HAROLD BJORNSON -- Vice President; Vice President, Back Bay
Advisors; formerly, Assistant Vice President, New England
Securities.
ROBERT BLANDING -- Senior Vice President; Chief Executive
Officer, Loomis, Sayles & Co.
CATHERINE L. BUNTING -- Vice President; Vice President, Back Bay
Advisors.
PHILIP J. COOPER -- Vice President; Vice President, Westpeak;
Vice President, TNE Advisers, Inc.; formerly, Portfolio
Manager, United Asset Management Services.
CHRISTINE A. CREELMAN -- Vice President; Vice President, Back Bay
Advisors.
BEVERLY J. DeWITT -- Secretary; Chief Legal Officer and Clerk,
TNE Advisers, Inc.; Attorney, The New England; Assistant
Secretary and Clerk, Westpeak; Assistant Secretary, New
England Securities Corp; formerly, Attorney, Choate, Hall and
Stewart.
PETER H. DUFFY -- Assistant Treasurer; Vice President, New
England Funds, L.P.
JOHN F. GUTHRIE -- Senior Vice President; Vice President of
Portfolio Strategy, The New England; Senior Vice President,
TNE Advisers, Inc.
RICHARD W. HURCKES -- Vice President; Vice President, Loomis
Sayles.
J. SCOTT NICHOLSON -- Vice President; Senior Vice President, Back
Bay Advisors.
ALAN C. LELAND -- Vice President; Chief Financial Officer, TNE
Advisers, Inc.; Vice President, The New England.
PETER PALFREY -- Vice President; Vice President, Back Bay
Advisors; formerly, Investment Vice President, MONY Capital
Management.
SCOTT PAPE -- Vice President ; Vice President, Loomis Sayles;
formerly, Equity Portfolio Manager, Illinois State Board of
Investment.
JEFFREY C. PETHERICK -- Vice President; Vice President, Loomis
Sayles.
DOUGLAS D. RAMOS -- Vice President; Vice President, Loomis
Sayles.
FRANK NESVET -- Treasurer; Senior Vice President and Chief
Financial Officer, New England Funds, L.P.; formerly,
Executive Vice President, SuperShare Services Corporation.
SHEILA M. BARRY -- Assistant Secretary; Vice President & Senior
Counsel, New England Funds, L.P.
LOUIS T. BALLERENE -- Assistant Treasurer; Assistant Vice
President, New England Funds, L.P.
_______________________________
* Trustee deemed an "interested person" of the Trust, as
defined in the 1940 Act.
Previous positions during the past five years with The New
England, Back Bay Advisors, CGM, Westpeak, Loomis Sayles or New
England Funds, L.P. are omitted, if not materially different.
Each of the Fund's Trustees is also a manager of New England
Variable Annuity Fund I for which New England Securities acts as
a principal underwriter and CGM as investment adviser.
Except as indicated above, the address of each trustee and
officer of the Fund affiliated with The New England is 501
Boylston Street, Boston, Massachusetts 02116. The address of
each trustee or officer of the Fund affiliated with Back Bay
Advisors, New England Funds, L.P. or New England Securities is
399 Boylston Street, Boston, Massachusetts. The address of each
trustee and officer affiliated with CGM is One International
Place, Boston, Massachusetts. Mr. Hurckes' and Mr. Pape's
address is Three First National Plaza, Chicago, Illinois and Mr.
Scriver's and Mr. Cooper's address is 1050 Walnut Street, Suite
300, Boulder, Colorado. Mr. Shepherd's address is 595 Fifth
Street West, Sonoma, California and Mr. Petherick's address is
1533 North Woodward, Suite 300, Bloomfield Hills, Michigan. Mr.
Ramos' and Ms. Beck's address is 155 Lake Avenue, Suite 1030,
Pasadena, California.
The officers and trustees of the Fund who are "interested
persons" receive no compensation from the Fund, for their
services in such capacities, although they do receive
compensation from The New England, Back Bay Advisors, CGM,
Westpeak, Loomis Sayles or New England Funds, L.P. for services
rendered in other capacities.
Trustees Fees
New England Zenith Fund pays no compensation to its officers
or to its trustees who are interested persons thereof.
Until May 1, 1995, each Trustee who is not an interested
person of the Fund received, in the aggregate for serving on the
boards of the Fund and twenty one other mutual fund portfolios, a
retainer fee at the annual rate of $40,000 and meeting attendance
fees of $2,500 for each meeting of the boards he or she attended
and $1,500 for each meeting he or she attended of a committee of
the board of which he or she was a member. Each committee
chairman received an additional retainer fee at the annual rate
of $2,500. These fees were allocated among the Series and the
twenty one other mutual fund portfolios based on a formula that
took into account, among other factors, the net assets of each
Series and each mutual fund.
Effective May 1, 1995, each Trustee who is not an interested
person has received for serving as Trustee of the Fund and on the
board of New England Variable Annuity Fund I ("NEVA") a retainer
fee at an annual rate of $20,000, and meeting attendance fees of
$2,000 for each board meeting attended and a special, one-time
fee of $5,000 relating to the services of the board in
conjunction with the restructuring of the boards. In addition,
the chairman of the Contract Review and Governance Committee will
receive a retainer at the annual rate of $3,000, and the chairman
of the Audit Committee will receive a retainer at the annual rate
of $2,000. The compensation will be allocated among the Series
and NEVA based on a formula that takes into account, among other
factors, the assets of each Series, and NEVA.
During the fiscal year ended December 31, 1995, the persons
who were then Trustees of the Fund received the amounts set forth
below for serving as a Trustee of the Fund and for also serving
on the governing boards of twenty-one other mutual fund
portfolios (the "Other Portfolios"). As of December 31, 1995,
there were a total of thirty-five portfolios or series in the
Fund and the Other Funds combined.
Aggregate
Aggregate Compensation Total
Compensation from Compensation
from the Other from the Fund
the Portfolios and
Fund in Other
in 1995 Portfolios
1995 in 1995
Name of Trustee
Nancy Hawthorne $24,307 $2,026 $26,333
Joseph M. Hinchey $34,314 $15,811 $50,125
Richard S. $32,485 $15,682 $48,167
Humphrey, Jr.
Robert B. Kittredge $31,860 $46,807(a) $78,667
Laurens MacLure $34,398 $47,102(a) $81,500
Dale Rogers $24,307 $2,026 $26,333
Marshall
Joseph F. Turley $32,485 $15,682 $48,167
(a) Also includes compensation paid by the portfolios of the CGM
Funds, a group of mutual funds for which Capital Growth
Management Limited Partnership, the investment adviser of the
Fund's Capital Growth Series, serves as investment adviser.
The Fund provides no pension or retirement benefits to
Trustees, but has adopted a deferred payment arrangement under
which each Trustee may elect not to receive fees from the Fund on
a current basis but to receive in a subsequent period an amount
equal to the value that such fees would have if they had been
invested in each Series on the normal payment date for such fees.
As a result of this method of calculating the deferred payments,
each Series, upon making the deferred payments, will be in the
same financial position as if the fees had been paid on the
normal payment dates.
At March 31, 1996, the officers and Trustees of the Fund as
a group owned less than 1% of the outstanding shares of the
Fund.
ADVISORY ARRANGEMENTS
Advisory Structure. Pursuant to separate advisory
agreements dated October 31, 1994, TNE Advisers, Inc., has agreed
to manage the investment and reinvestment of assets of the
Draycott International Equity, Alger Equity Growth, Venture
Value, Loomis Sayles Balanced, Salomon Brothers Strategic Bond
Opportunities and Salomon Brothers U.S. Government Series.
Pursuant to separate advisory agreements with the Fund, each
dated May 1, 1995, TNE Advisers, Inc. has agreed to manage the
investment and reinvestment of the assets of the Loomis Sayles
Small Cap, Loomis Sayles Avanti Growth, Westpeak Value Growth,
Westpeak Stock Index, Back Bay Advisors Managed, Back Bay
Advisors Bond Income and Back Bay Advisors Money Market Series.
TNE Advisers, Inc. has delegated certain of these
responsibilities, including responsibility for determining what
investments such Series should purchase, hold or sell and
directing all trading for the Series' account, for each of the
above Series to subadvisers under subadvisory agreements
described below. Pursuant to an advisory agreement dated
September 1, 1993 (which replaced a substantially identical
agreement dated March 1, 1990), CGM has agreed to manage the
investment and reinvestment of the assets of the Capital Growth
Series.
In each case, advisory services are provided subject to the
supervision and control of the Fund's trustees. Each advisory
agreement also provides that the relevant investment adviser will
furnish or pay the expenses of the applicable Series for office
space, facilities and equipment, services of executive and other
personnel of the Fund and certain administrative services. TNE
Advisers, Inc. has subcontracted with New England Funds, L.P. to
provide, at no extra cost to the Series it advises, certain
administrative services to the Fund. CGM, in the case of the
Capital Growth Series, has subcontracted with New England Funds,
L.P. to provide such services for that Series.
TNE Advisers, Inc. is a wholly-owned subsidiary of The New
England organized in 1994. TNE Advisers, Inc. oversees,
evaluates and monitors the subadvisers' provision of investment
advisory services to all of the Series (except the Capital Growth
Series) and provides general business management and
administration to all of the Series (except the Capital Growth
Series).
The New England and Metropolitan Life Insurance Company
("MetLife") have entered into an agreement to merge, with MetLife
to be the survivor of the merger. The merger is conditioned
upon, among other things, receipt of certain regulatory
approvals.
The merger of The New England into MetLife is being treated,
for purposes of the Investment Company Act of 1940 (the "Act"),
as an "assignment" of the existing advisory agreements for each
Series and of the subadvisory agreements of the eight Series that
have NEIC subsidiaries as subadvisers. Under the Act, such an
"assignment" will result in an automatic termination of these
agreements. The subadvisory agreements for the other Series
terminate automatically, by their terms, upon any termination of
TNE Advisers' advisory agreement with the Fund. Thus, those
subadvisory agreements will also terminate at the time of the
merger. Shareholders of the Series have approved new investment
advisory and subadvisory agreements, intended to take effect at
the time of the merger. The new agreements are substantially
identical to the existing agreements.
Subject to the supervision of TNE Advisers, Inc. each
subadviser, pursuant to Subadvisory Agreements dated either
October 31, 1994 (in the case of the Alger Equity Growth, Venture
Value, Loomis Sayles Balanced, Salomon Brothers Strategic Bond
Opportunities and Salomon Brothers U.S. Government Series) or May
1, 1995, (in the case of the Loomis Sayles Small Cap, Loomis
Sayles Avanti Growth, Westpeak Value Growth, Westpeak Stock
Index, Back Bay Advisors Managed, Back Bay Advisors Bond Income
and Back Bay Advisors Money Market Series) or February 29, 1996
(in the case of the Draycott International Equity Series, which
agreement replaces an earlier agreement dated December 29, 1995,
which replaced an earlier agreement dated October 31, 1994)
manages the assets of its Series in accordance with that Series'
investment objective and policies, makes investment decisions for
that Series and employs professional advisers and securities
analysts who provide research services to that Series. The
Series pay no direct fees to any of the subadvisers.
Back Bay Advisors, formed in 1986, is a subsidiary of NEIC.
NEIC's sole general partner, New England Investment Companies,
Inc., is a subsidiary of The New England. NEIC and its seven
subsidiary or affiliated asset management firms, collectively,
have more than $___ billion of assets under management or
administration. Back Bay Advisors provides investment management
services to institutional clients, including other registered
investment companies and accounts of The New England and its
affiliates. Back Bay Advisors specializes in fixed-income
management and currently manages over $___ billion in total
assets; it is subadviser Back Bay Advisors Managed, Back Bay
Advisors Bond Income and Back Bay Money Market Series.
Loomis Sayles, subadviser to the Loomis Sayles Small Cap,
Loomis Sayles Avanti Growth and Loomis Sayles Balanced Series,
was organized in 1926 and is one of the oldest and largest
investment counsel firms in the country. An important feature of
the Loomis Sayles investment approach is its emphasis on
investment research. Recommendations and reports of the Loomis
Sayles research department are circulated throughout the Loomis
Sayles organization and are available to the individuals in the
Loomis Sayles organization who have been assigned the
responsibility for making investment decisions for the Funds'
portfolios. Loomis Sayles provides investment advice to numerous
other institutional and individual clients. These clients
include other registered investment companies and some accounts
of The New England and its affiliates ("New England Accounts").
Loomis Sayles is a subsidiary of NEIC.
Draycott, formed in 1991, provides investment management
services to mutual funds and to institutional clients, including
one separate account of The New England and its affiliates; it is
subadviser to the Draycott International Equity Series. Draycott
is a wholly-owned subsidiary of Cursitor Alliance LLC. Alliance
Capital Management L.P. ("Alliance Capital") owns a 93% interest
in Cursitor Alliance LLC. Alliance Capital Management
Corporation ("ACMC") is the sole general partner of, and the
owner of a 1% general partnership interest in, Alliance Capital.
ACMC is an indirectly wholly-owned subsidiary of The Equitable
Life Assurance Socity of the United States, which is a wholly-
owned subsidiary of The Equitable Companies Incorporated, a
holding company controlled by AXA, a French insurance holding
company.
Fred Alger Management Inc. ("Alger Management") provides
investment management services to mutual funds and to other
institutions and individuals; it is subadviser to the Alger
Equity Growth Series. Alger Management, a wholly-owned
subsidiary of Fred Alger Company, Inc., which in turn is a wholly-
owned subsidiary of Alger Associates, Inc., a financial services
holding company. Frederick M. Alger III and his brother, David
D. Alger, own approximately 53% and 17%, respectively, of Alger
Associates, Inc. and may be deemed to control that company and
its subsidiaries.
CGM is a limited partnership whose general partner is a
corporation controlled equally by Robert L. Kemp and G. Kenneth
Heebner. In addition to advising the Capital Growth Series, CGM
acts as investment adviser of CGM Capital Development Fund, CGM
Trust, New England Variable Annuity Fund I and New England Growth
Fund of the New England Funds. CGM also provides investment
advice to other institutional and individual clients.
Westpeak is a wholly-owned subsidiary of NEIC. Organized in
1991, Westpeak provides investment management services to a
mutual fund and other institutional clients, including accounts
of The New England and its affiliates; it is subadviser to the
Westpeak Value Growth and Westpeak Stock Index Series.
Davis Selected Advisors, L.P. ("Davis Selected") provides
investment advisory services for mutual funds and other clients;
it is subadviser to the Venture Value Series. Venture Advisers,
Inc., the general partner of Davis Selected, is controlled by
Shelby M.C. Davis.
Salomon Brothers Asset Management Inc ("SBAM") is a wholly-
owned subsidiary of Salomon Inc which provides investment
advisory services for individuals, other mutual funds and
institutional clients; it is subadviser to the Salomon Brothers
U.S. Government Series and the Salomon Brothers Strategic Bond
Opportunities Series.
Advisory Fees. Each Series pays its adviser compensation at
the annual percentage rates of the corresponding levels of that
Series' average daily net asset values (the adviser of the
Capital Growth Series is CGM, the adviser of each other Series is
TNE Advisers).
Annual Average
Percentage Daily Net
Series Rate Asset Value Levels
Loomis Sayles 1.00% all assets
Small Cap Series
Draycott .90% all assets
International
Equity Series
Alger Equity .75% all assets
Growth Series
Capital Growth .70% the first $200 million
Series
.65% the next $300 million
.60% amounts in excess of
$500 million
Loomis Sayles .70% the first $200 million
Avanti Growth .65% the next $300 million
Series
.60% amounts in excess of
$500 million
Venture Value .75% all assets
Series
Westpeak Value .70% the first $200 million
Growth Series .65% the next $300 million
.60% amounts in excess of
$500 million
Westpeak Stock .25% all assets
Index Series
Loomis Sayles .70% all assets
Balanced Series
Back Bay Advisors .50% all assets
Managed Series
Salomon Brothers .65% all assets
Strategic Bond
Opportunities
Series
Back Bay Advisors .40% the first $400 million
Bond Income .35% the next $300 million
Series
.30% the next $300 million
.25% amounts in excess of
$1 billion
Salomon Brothers .55% all assets
U.S. Government
Series
Back Bay Advisors .35% the first $500 million
Money Market .30% the next $500 million
Series .25% amounts in excess of
$1 billion
Subadvisory Fees.
Sub-Advisory Fees. TNE Advisers pays each sub-adviser at the
following rates for providing sub-advisory services to the
following Series:
Series Annual Percentage Average Daily Net Asset
Rates Paid Value Levels
by TNE
Advisers to the
Respective
Sub-Advisers
Loomis Sayles Small Cap 0.55% of the first $25 million
Series
0.50% of the next $75 million
0.45% of the next $100 million
0.40% of amounts in excess of
$200 million
Draycott International 0.75% of the first $10 million
Equity Series
0.60% of the next $40 million
0.45% of amounts in excess of
$50 million
Alger Equity Growth 0.45% of the first $100 million
Series
0.40% of the next $400 million
0.35% of amounts in excess of
$500 million
Loomis Sayles Avanti 0.50% of the first $25 million
Growth
Series 0.40% of the next $75 million
0.35% of the next $100 million
0.30% of amounts in excess of
$200 million
Venture Value Series 0.45% of the first $100 million
0.40% of the next $400 million
0.35% of amounts in excess of
$500 million
Westpeak Value Growth 0.50% of the first $25 million
Series
0.40% of the next $75 million
0.35% of the next $100 million
0.30% of amounts in excess of
$200 million
Westpeak Stock Index 0.10% of all assets
Series
Loomis Sayles Balanced 0.50% of the first $25 million
Series
0.40% of the next $75 million
0.30% of amounts in excess of
$100 million
Back Bay Advisors 0.25% of the first $50 million
Managed Series
0.20% of amounts in excess of
$50 million
Salomon Brothers 0.35% of the first $50 million
Strategic Bond
Opportunities Series 0.30% of the next $150 million
0.25% of the next $300 million
0.20% of amounts in excess of
$500 million
Back Bay Advisers Bond 0.25% of the first $50 million
Income
Series 0.20% of the next $200 million
0.15% of amounts in excess of
$250 million
Salomon Brothers U.S. 0.225% of the first $200 million
Government
Series 0.150% of the next $300 million
0.100% of amounts in excess of
$500 million
Back Bay Advisors Money 0.15% of the first $100 million
Market
Series 0.10% of amounts in excess of
$100 million
In connection with SBAM's service as subadviser to the
Strategic Bond Opportunities Series, SBAM's London based
affiliate, Salomon Brothers Asset Management Limited ("SBAM
Limited"), Victoria Plaza, 111 Buckingham Palace Road, London
SW1W OSB, England, serves as subadviser to SBAM relating to
currency transactions and investments in non-dollar denominated
debt securities for the benefit of the Salomon Brothers Strategic
Bond Opportunities Series. For these services, SBAM has agreed
to pay SBAM Limited one-third of the compensation that SBAM
receives for serving as subadviser to the Series. SBAM Limited
is an indirect, wholly-owned subsidiary of Salomon Inc.
For the fiscal year ended December 31, 1993, the Back Bay
Advisors Money Market Series, the Back Bay Advisors Bond Income
Series and the Back Bay Advisors Managed Series paid advisory
fees of $213,811, $429,841 and $501,403, respectively, to Back
Bay Advisors and for that same period, the Capital Growth Series
paid $3,729,518 to CGM. For the period April 30 to December 31,
1993, the Westpeak Value Growth Series paid advisory fees of
$18,667 to Westpeak and the Loomis Sayles Avanti Growth Series
paid advisory fees of $23,455 to Loomis Sayles. For the period
January 1, 1993 to July 31, 1993, the Westpeak Stock Index Series
paid advisory fees of $22,166 to Back Bay Advisors and for the
period August 1,1993 to December 31, 1993, paid advisory fees of
$27,101 to Westpeak.
For the fiscal year ended December 31, 1994, the Back Bay
Advisors Managed Series, the Back Bay Advisors Bond Income Series
and the Back Bay Advisors Money Market Series paid advisory fees
of $613,249, $515,084 and $231,326, respectively, to Back Bay
Advisors. For that same period, the Capital Growth Series paid
advisory fees of $4,396,663 to CGM, the Westpeak Value Growth
Series and the Westpeak Stock Index Series paid advisory fees of
$111,827 and $83,095, respectively, to Westpeak and the Loomis
Sayles Avanti Growth Series paid advisory fees of $132,596 to
Loomis Sayles. For the period May 1, 1994 to December 31, 1994,
the Loomis Sayles Small Cap Series paid no advisory fees to
Loomis Sayles. For the period October 31, 1994 to December 31,
1994, the Loomis Sayles Balanced, the Draycott International
Equity, Salomon Brothers U.S. Government, Salomon Brothers
Strategic Bond Opportunities, Venture Value and the Alger Equity
Growth Series paid no advisory fees to TNE Advisers, Inc.
For the following periods in 1995, advisory fees were paid
by the following Series:
<TABLE>
January 1, 1995 to May 1, 1995 to January 1, 1995 to
April 30, 1995 December 31, 1995 December 31, 1995
Series Amount Adviser Amount Adviser Amount Adviser
Paid Paid Paid Paid Paid Paid
<S> <C> <C> <C> <C> <C> <C>
Loomis
Sayles $22,671 Loomis $124,433 TNE -- --
Small Sayles Advisers
Cap , Inc.
Series
Draycott
Interna- -- -- -- -- $85,666 TNE
tional Advisers
Equity , Inc.
Series
Alger TNE
Equity -- -- -- -- $144,943 Advisers
Growth , Inc.
Series
Capital
Growth -- -- -- -- $5,232,5 CGM
Series 62
Loomis
Sayles $65,057 Loomis $195,829 TNE -- --
Avanti Sayles Advisers
Growth , Inc.
Series
January 1, 1995 to May 1, 1995 to January 1, 1995 to
April 30, 1995 December 31, 1995 December 31, 1995
Series Amount Adviser Amount Adviser Amount Adviser
Paid Paid Paid Paid Paid Paid
<S> <C> <C> <C> <C> <C> <C>
Venture TNE
Value -- -- -- -- $131,969 Advisers
Series , Inc.
Westpeak
Value $59,980 Westpeak $182,648 TNE -- --
Growth Advisers
Series , Inc.
Westpeak
Stock $33,568 Westpeak $88,791 TNE -- --
Index Advisers
Series , Inc.
Loomis
Sayles -- -- -- -- $65,752 TNE
Balanced Advisers
Series , Inc.
Back Bay
Advisors $207,821 Back Bay $467,918 TNE -- --
Managed Advisors Advisers
Series , Inc.
Salomon
Brothers
Strategi -- -- -- -- $35,085 TNE
c Bond Advisers
Opportun , Inc.
ities
Series
Back Bay
Advisors $173,139 Back Bay $399,140 TNE -- --
Bond Advisors Advisers
Income , Inc.
Series
Salomon
Brothers
U.S. -- -- -- -- $20,446 TNE
Governme Advisers
nt , Inc.
Series
Back Bay
Advisors $84,329 Back Bay $193,678 TNE -- --
Money Advisors Advisers
Market , Inc.
Series
Each advisory and subadvisory agreement provides that it
will continue in effect after two years from the date of its
execution only if it is approved at least annually thereafter (i)
by the trustees of the Fund or by vote of a majority of the
outstanding voting securities of the applicable Series and (ii)
by vote of a majority of the trustees who are not interested
persons of (i) the Fund or (ii) the applicable Series' investment
adviser or subadviser. Any amendment to any advisory or
subadvisory agreement must be approved by vote of a majority of
the outstanding voting securities of the applicable Series and by
vote of a majority of the trustees who are not interested persons
of (i) the Fund or (ii) the applicable Series' investment adviser
or subadviser. Each agreement may be terminated without penalty
by the trustees or by the shareholders of the applicable Series,
upon sixty days' written notice, or by the applicable Series'
investment adviser, upon ninety days' written notice, and each
terminates automatically in the event of its assignment. In
addition, each subadvisory agreement may be terminated without
penalty upon ninety days' written notice by the relevant
subadviser. Each advisory agreement will automatically terminate
if the Fund shall at any time be required by New England
Securities, which is an indirectly wholly-owned subsidiary of The
New England, to eliminate all reference to the words "New
England" in its name, unless the continuance of such agreement
after such change of name is approved by a majority of the
outstanding voting securities of the applicable Series and by a
majority of the trustees who are not interested persons of (i)
the Fund or (ii) the applicable Series' investment adviser.
Each advisory agreement provides that if the total ordinary
business expenses of a particular Series for any fiscal year
exceed the lowest applicable limitations (based on a percentage
of average net assets or income) prescribed by any state in which
shares of that Series are qualified for sale, the applicable
Series' investment adviser shall pay such excess. Each advisory
agreement provides, however, that the advisory fee shall not be
reduced nor shall any of such expenses be paid to an extent or
under circumstances which might result in the inability of any
Series or of the Fund, taken as a whole, to qualify as a
regulated investment company under the Internal Revenue Code of
1986, as amended. The term "expenses" for this purpose excludes
brokerage commissions, taxes, interest and extraordinary
expenses.
As required by state insurance licensing authorities, each
Series' investment adviser has also undertaken, separately from
the advisory agreements, to be liable for negligence in the
performance of any administrative services with respect to the
Fund which are supplemental to their management of the investment
and reinvestment of that Series' assets.
Each advisory and subadvisory agreement provides that the
relevant investment adviser or subadviser shall not be subject to
any liability in connection with the performance of its services
thereunder in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and
duties.
Certain officers and employees of Back Bay Advisors who are
also officers of the Fund have responsibility for portfolio
management of the other advisory accounts and clients (including
other Series of the Fund and other registered investment
companies, and accounts of affiliates of Back Bay Advisors) that
may invest in securities in which the Series for which Back Bay
Advisors acts as a subadviser may invest. Where Back Bay
Advisors determines that an investment purchase or sale
opportunity is appropriate and desirable for more than one
advisory account, purchase and sale orders may be executed
separately or may be combined and, to the extent practicable,
allocated by Back Bay Advisors to the participating accounts.
Where advisory accounts have competing interests in a
limited investment opportunity, Back Bay Advisors will allocate
an investment purchase opportunity based on the relative time
that competing accounts have had funds available for investment,
and the relative amounts of available funds, and will allocate an
investment sale opportunity based on relative cash requirements
and the time that the competing accounts have had investments
available for sale. It is BBA's policy to allocate, to the
extent practicable, investment opportunities to each client over
a period of time on a fair and equitable basis relative to its
other clients.
It is believed that the ability of the Series for which Back
Bay Advisors acts as subadviser to participate in larger volume
transactions in this manner will in some cases produce better
executions for the Series. However, in some cases, this
procedure could have a detrimental effect on the price and amount
of a security available to a Series or the price at which a
security may be sold. The trustees are of the view that the
benefits of retaining Back Bay Advisors as subadviser outweigh
the disadvantages, if any, that might result from participating
in such transactions.
Certain officers of Loomis Sayles who are also officers of
the Fund have responsibility for the management of other client
portfolios. The Detroit office of Loomis Sayles buys and sell
portfolio securities for the Loomis Sayles Small Cap Series. The
Chicago office of Loomis Sayles buys and sells portfolio
securities for the Loomis Sayles Avanti Growth Series. The
Pasadena office buys and sells portfolio securities for the
Loomis Sayles Balanced Series. These and other offices of Loomis
Sayles buy securities independently of one another. The other
investment companies and clients served by Loomis Sayles
sometimes invest in securities in which the Series advised by
Loomis Sayles also invest. If one of these Series and such other
clients advised by the same office of Loomis Sayles desire to buy
or sell the same portfolio securities at about the same time,
purchases and sales will be allocated, to the extent practicable,
on a pro rata basis in proportion to the amounts desired to be
purchased or sold for each. It is recognized that in some cases
the practices described in this paragraph could have a
detrimental effect on the price or amount of a security which
that Series purchases or sells. In other cases, however, it is
believed that these practices may benefit the Series. It is the
opinion of the trustees of the Fund that the desirability of
retaining Loomis Sayles as subadviser for these Series outweighs
the disadvantages, if any, which might result from these
practices.
Certain officers of Westpeak, some of whom are officers of
the Fund, have responsibility for portfolio management for other
clients (including affiliates of Westpeak), some of which may
invest in securities in which the Westpeak Value Growth Series or
the Westpeak Stock Index Series also may invest. When these
Series and other clients desire to purchase or sell the same
security at or about the same time, the purchase and sale orders
are ordinarily placed and confirmed separately but may be
combined to the extent practicable and allocated as nearly as
practicable on a pro rata basis in proportion to the amounts
desired to be purchased or sold for each. It is believed that
the ability of those clients to participate in larger volume
transactions will in some cases produce better executions for the
Westpeak Value Growth Series and the Westpeak Stock Index Series.
However, in some cases this procedure could have a detrimental
effect on the price and amount of a security available to a
Series or the price at which a security may be sold. It is the
opinion of the trustees of the Fund that the desirability of
retaining Westpeak as subadviser for the Westpeak Value Growth
Series and the Westpeak Stock Index Series outweighs the
disadvantages, if any, which might result from these practices.
Certain officers and employees of Draycott have
responsibility for portfolio management for other clients
(including affiliates of Draycott), some of which may invest in
securities in which the Draycott International Equity Series also
may invest. When the Series and other clients desire to purchase
or sell the same security at or about the same time, purchase and
sale orders are ordinarily placed and confirmed separately but
may be combined to the extent practicable and allocated as nearly
as practicable on a pro rata basis in proportion to the amounts
desired to be purchased or sold for each. It is believed that
the ability of those clients to participate in larger volume
transactions will in some cases produce better executions for the
Draycott International Equity Series. However, in some cases
this procedure could have a detrimental effect on the price and
amount of a security available to the Draycott International
Equity Series or the price at which a security may be sold. It
is the opinion of the trustees that the desirability of retaining
Draycott as subadviser to the Series outweighs the disadvantages,
if any, which might result from such procedure.
Various officers and trustees of the Fund also serve as
officers or trustees of other investment companies advised by
CGM. The other investment companies and clients served by CGM
(including accounts of affiliates of CGM) sometimes invest in
securities in which the Capital Growth Series also invests. If
the Capital Growth Series and such other investment companies or
clients advised by CGM desire to buy or sell the same portfolio
securities at the same time, purchases and sales will be
allocated to the extent practicable on a pro rata basis in
proportion to the amounts desired to be purchased or sold for
each. It is recognized that in some cases the practices
described in this paragraph could have a detrimental effect on
the price or amount of the securities which the Capital Growth
Series purchases or sells. In other cases, however, it is
believed that these practices may benefit the Capital Growth
Series. It is the opinion of the trustees that the desirability
of retaining CGM as adviser for the Capital Growth Series
outweighs the disadvantages, if any, which might result from
these practices.
Certain officers and employees of SBAM, Davis Selected and
Alger Management have responsibility for portfolio management for
other clients (including other registered investment companies
and affiliates of SBAM, Davis Selected or Alger Management) some
of which may invest in securities in which the respective Series
that these subadvisers manage also invest. In such
circumstances, SBAM, Davis Selected or Alger Management may
determine that orders for the purchase or sale of the same
security for the Series it manages and one or more other
registered investment companies or other accounts it manages
should be combined, in which event the transactions will be
priced and allocated in a manner deemed by SBAM, Davis Selected
or Alger Management, respectively, to be equitable and in the
best interests of the respective Series that it manages and its
other accounts. It is recognized that in some cases the
practices described in this paragraph could have a detrimental
effect on the price or amount of a security that a Series
purchases or sells. In other cases, however, it is believed that
these practices may benefit a Series. It is the opinion of the
trustees that the desirability of retaining SBAM, Davis Selected
and Alger Management as subadvisers for the respective Series
outweighs the disadvantages, if any, which might result from
these practices.
DISTRIBUTION AGREEMENT
Under an agreement with the Fund, New England Securities, a
Massachusetts corporation, serves as the general distributor of
shares of each Series, which are sold at net asset value without
any sales charge. The offering of each Series' shares is
continuous. Shares are offered for sale only to certain
insurance company separate accounts. New England Securities
receives no compensation from the Fund or purchasers of Fund
shares for acting as distributor. The agreement does not
obligate New England Securities to sell a specific number of
shares. New England Securities is a wholly-owned subsidiary of
The New England.
New England Securities controls the words "New England" in
the Fund's name and if it should cease to be the Fund's
distributor, the Fund may be required to change its name and
delete these words. New England Securities also acts as general
distributor for New England Retirement Investment Account, New
England Variable Annuity Fund I, The New England Variable
Account, New England Variable Annuity Separate Account and New
England Variable Life Separate Account.
OTHER SERVICES
Custodial Arrangements. State Street Bank and Trust Company
("State Street Bank"), Boston, Massachusetts 02102, is the Fund's
custodian. As such, State Street Bank holds in safekeeping
certificated securities and cash belonging to each Series and, in
such capacity, is the registered owner of securities held in book-
entry form belonging to the Series. Upon instruction, State
Street Bank receives and delivers cash and securities of the
Series in connection with Series transactions and collects all
dividends and other distributions made with respect to Series
portfolio securities. State Street Bank also maintains certain
accounts and records of the Fund and calculates the total net
asset value, total net income and net asset value per share of
each Series on a daily basis.
Independent Accountants. The Fund's independent accountants
are Coopers & Lybrand, One Post Office Square, Boston,
Massachusetts 02109. Coopers & Lybrand conducts an annual audit
of each Series, assists in the preparation of federal and state
income tax returns and consults with the Fund as to matters of
accounting and federal and state income taxation. A table of
selected per share data and ratios for each of the Series appears
in the Prospectus. This table and the financial statements
included in this Statement of Additional Information are included
in reliance on the report of Coopers & Lybrand for the years 1987
through 1994 and on the report of the Fund's former independent
accountants, Price Waterhouse, for the years 1985 and 1986, given
on the authority of said firms as experts in auditing and
accounting.
Other Arrangements. Office space, facilities, equipment
and/or certain administrative services for the Fund (and, where
applicable, other mutual funds) under the investment management
of CGM or TNE Advisers, Inc. are currently furnished by New
England Funds, L.P., under separate service agreements with
those investment advisers. Under a service agreement between
Back Bay Advisors and New England Securities for fiscal years
ended December 31, 1993, 1994 and 1995, Back Bay Advisors paid
New England Securities or New England Funds, L.P., an affiliate
of New England Securities, $51,918, $51, 918 and $71,233,
respectively, relating to the Back Bay Advisors Money Market
Series; $91,245, $109,472 and and $126,352, respectively,
relating to the Back Bay Advisors Bond Income Series; and
$85,151, $104,256 and $120,279, respectively, relating to the
Back Bay Advisors Managed Series under a service agreement. For
the fiscal year ended December 31, 1992 and the period January 1,
1993 through July 31, 1993, Back Bay Advisors paid New England
Securities or New England Funds, L.P. $17,920 and $ 7,552,
respectively, for the Westpeak Stock Index Series, which it
managed prior to August 1, 1993, under such agreement. Under a
service agreement between New England Securities and CGM, CGM
paid New England Securities or New England Funds, L.P., for
fiscal years ended December 31, 1993, 1994 and 1995, $530,147,
$621,253 and $734,743, respectively, relating to the Capital
Growth Series. Under a service agreement between Loomis Sayles
and New England Funds, L.P., Loomis Sayles paid New England
Funds, L.P. for the period April 30, 1993 through December 31,
1993 and the fiscal years ended December 31, 1994 and 1995
$5,497, $29,614 and $34,683, respectively, for the Avanti Growth
Series. Under the service agreement between New England
Securities and Westpeak, Westpeak paid New England Securities
$4,735 for the period April 30, 1993 to December 31, 1993 and
$25,381 and $31,668 for the fiscal years ended December 31, 1994
and 1995, respectively, for the Westpeak Value Growth Series and
$16,164, $49,833 and $49,914 for the period August 1, 1993 to
December 31, 1993 and for the fiscal years ended December 31,
1994 and 1995, respectively, for the Westpeak Stock Index Series.
Under a service agreement between Loomis, Sayles and New England
Funds, L.P., Loomis Sayles paid New England Funds, L.P. $2,007
for the period May 1, 1994 to December 31, 1994, and $10,604 for
the fiscal year ended December 31, 1995 for the Loomis Sayles
Small Cap Series.
For the period October 31, 1994 through December 31, 1994,
under the service agreement between New England Funds, L.P. and
TNE Advisers, Inc., TNE Advisers, Inc. paid $1,666 for the Loomis
Sayles Balanced Series, $1,666 for the Draycott International
Equity Series, $1,666 the Salomon Brothers U.S. Government
Series, $1,666 for the Salomon Brothers Strategic Bond
Opportunities Series, $1,666 for the Venture Value Series and
$1,666 for the Alger Equity Growth Series; for the fiscal year
ended December 31, 1995, TNE Advisers, Inc. paid $10,044 for the
Loomis Sayles Balanced Series, $10,044 for the Draycott
International Equity Series, $10,044 for the Salomon Brothers
U.S. Government Series, $10,044 for the Salomon Brothers
Strategic Bond Opportunities Series, $11,503 for the Venture
Value Series and $13,133 for the Alger Equity Growth Series.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Some of the Fund's portfolio transactions are placed with
brokers and dealers who provide the investment advisers or
subadvisers with supplementary investment and statistical
information or furnish market quotations to the Fund or other
investment companies advised by the investment advisers or
subadvisers. Although it is not possible to assign an exact
dollar value to these services, they may, to the extent used,
tend to reduce the expenses of the investment advisers or
subadvisers. The services may also be used by the investment
advisers or subadvisers in connection with their other advisory
accounts and in some cases may not be used with respect to the
Fund.
Certain Portfolio Transactions of Loomis Sayles Balanced and Back
Bay Advisors Managed Series; Back Bay Advisors Bond Income Series
and Back Bay Advisors Money Market Series
It is expected that the portfolio transactions of the Loomis
Sayles Balanced Series and the Back Bay Advisors Managed Series,
and portfolio transactions of the Back Bay Advisors Bond Income
Series and Back Bay Advisors Money Market Series in bonds, notes
and money market instruments, will generally be with issuers or
dealers on a net basis without a stated commission. Portfolio
turnover for the years 1993, 1994 and 1995 was 177%, 82% and __%
respectively, for the Back Bay Advisors Bond Income Series and
22%, 76% and ___%, respectively, for the Back Bay Advisors
Managed Series.
Loomis Sayles Small Cap Series, Draycott International Equity
Series, Alger Equity Growth Series, Capital Growth Series, Loomis
Sayles Avanti Growth Series, Venture Value Series, Loomis Sayles
Balanced Series (Common Stock Transactions) and Back Bay Advisors
Managed Series
In placing orders for the purchase and sale of portfolio
securities, CGM, in the case of the Capital Growth Series, Loomis
Sayles, in the case of the Loomis Sayles Avanti Growth Series,
the Loomis Sayles Small Cap Series and the Loomis Sayles Balanced
Series, Back Bay Advisors in the case of investments in common
stocks by the Back Bay Advisors Managed Series, Draycott, in the
case of the Draycott International Equity Series, Davis Selected,
in the case of the Venture Value Series, and Alger Management, in
the case of the Alger Equity Growth Series, each select only
brokers which it believes are financially responsible, will
provide efficient and effective services in executing, clearing
and settling an order and will charge commission rates which,
when combined with the quality of the foregoing services, will
produce best price and execution for the transaction. This does
not necessarily mean that the lowest available brokerage
commission will be paid. However, the commissions are believed
to be competitive with generally prevailing rates. The Series'
advisers or subadvisers will use their best efforts to obtain
information as to the general level of commission rates being
charged by the brokerage community from time to time and will
evaluate the overall reasonableness of brokerage commissions paid
on transactions by reference to such data. In making such
evaluation, all factors affecting liquidity and execution of the
order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account. The
Capital Growth Series, Loomis Sayles Avanti Growth Series, Loomis
Sayles Small Cap Series, Loomis Sayles Balanced Series, Back Bay
Advisors Managed Series, Draycott International Equity Series,
Venture Value Series and Alger Equity Growth Series will not pay
a broker a commission at a higher rate than otherwise available
for the same transaction in recognition of the value of research
services provided by the broker or of any other services provided
by the broker which do not contribute to the best price and
execution of the transaction.
For the fiscal years ending in 1993, 1994 and 1995,
brokerage transactions for the Capital Growth Series aggregating
$1,745,079,465, $1,855,305,003 and $___________, respectively,
were allocated to brokers providing research services and
commissions of $2,851,197, $2,659,378 and $________,
respectively, were paid on those transactions. For the fiscal
years ending in 1993, 1994 and 1995 the Westpeak Stock Index
Series paid brokerage commissions aggregating $21,000, $10,918
and $______, respectively. For the same periods, the Back Bay
Advisors Managed Series paid brokerage commissions aggregating
$17,000, $21,159 and $_______, respectively. For the period
April 30, 1993 to December 31, 1993, the Loomis Sayles Avanti
Growth Series and the Westpeak Value Growth Series paid brokerage
commissions aggregating $10,000 and $12,000, respectively; for
the fiscal years ending December 31, 1994 and December 31, 1995,
the Loomis Sayles Avanti Growth Series paid brokerage commissions
of $67,095 and $_____and, for the same periods, the Westpeak
Value Growth Series paid brokerage commissions of $54,751 and
$_______. For the period May 1, 1994 to December 31, 1994, the
Loomis Sayles Small Cap Series paid brokerage commissions of
$7,395. For the period October 31, 1994 to December 31, 1994,
the Draycott International Equity Series paid brokerage
commissions of $4,714, the Venture Value Series paid brokerage
commissions of $6,084 and the Alger Equity Growth Series paid
brokerage commissions of $2,452. For the fiscal year ended
December 31, 1995, the Draycott International Equity Series paid
brokerage commissions of $_____, the Venture Value Series paid
brokerage commissions of $40,523 and the Alger Equity Growth
Series paid brokerage commissions of $69,052
Westpeak Value Growth Series, Westpeak Stock Index Series,
Salomon Brothers Strategic Bond Opportunities Series and Salomon
Brothers U.S. Government Series
In placing orders for the purchase and sale of securities,
Westpeak, in the case of the Westpeak Value Growth Series and the
Westpeak Stock Index Series, and SBAM, in the case of Salomon
Brothers Strategic Bond Opportunities Series and Salomon Brothers
U.S. Government Series, always seeks best execution. Westpeak
and SBAM each selects only brokers or dealers which it believes
are financially responsible, will provide efficient and effective
services in executing, clearing and settling an order and will
charge commission rates which, when combined with the quality of
the foregoing services, will produce best price and execution.
This does not necessarily mean that the lowest available
brokerage commission will be paid. Westpeak or SBAM will each
use its best efforts to obtain information as to the general
level of commission rates being charged by the brokerage
community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by
reference to such data. In making such evaluation, all factors
affecting liquidity and execution of the order, as well as the
amount of the capital commitment by the broker in connection with
the order, are taken into account. Westpeak or SBAM may cause
the Series they manage to pay a broker-dealer that provides
brokerage and research services to Westpeak or SBAM an amount of
commission for effecting a securities transaction for a Series in
excess of the amount another broker-dealer would have charged
effecting that transaction. Westpeak or SBAM, as the case may
be, must determine in good faith that such greater commission is
reasonable in relation to the value of the brokerage and research
services provided by the executing broker-dealer viewed in terms
of that particular transaction or Westpeak's or SBAM's overall
responsibilities to the Fund and its other clients. Westpeak's
or SBAM's authority to cause the Series it manages to pay such
greater commissions is also subject to such policies as the
trustees of the Fund may adopt from time to time.
Affiliated Brokerage
A Series may pay brokerage commissions to an affiliated
broker for acting as the respective Series' agent on purchases
and sales of securities for the portfolio of the Series. SEC
rules require that commissions paid to an affiliated broker of a
mutual fund for portfolio transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and
customary" commissions to include amounts which are "reasonable
and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with
comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable
period of time." The Trustees, including those who are not
"interested persons" of the Fund, have adopted procedures for
evaluating the reasonableness of commissions paid to affiliated
brokers and will review these procedures periodically. The
Westpeak Stock Index Series paid $0, $0 and $__in brokerage
commissions to New England Securities, an affiliated broker of
the Series, in 1993, 1994, and 1995, respectively. The Back Bay
Advisors Managed Series paid $17,268, $0 and $0 in brokerage
commissions to New England Securities, an affiliated broker of
the Series, in 1993, 1994 and 1995, respectively. The Back Bay
Advisors Bond Income Series paid no commissions to New England
Securities during those periods. The Alger Equity Growth Series
paid $2,452 and $_____in brokerage commissions to Fred Alger and
Company, Inc., an affiliated broker, for the period October 31,
1994 to December 31, 1994 and the year ended December 31, 1995,
respectively. The amounts paid by the Westpeak Stock Index
Series represent approximately 0% , 0% and ___% of that Series'
aggregate brokerage commissions involving the payment of
commissions for fiscal years 1993, 1994 and 1995 respectively.
The amount paid by the Back Bay Advisors Managed Series
represents approximately 100%, 0% and ___% of that Series'
aggregate brokerage commissions in 1993, 1994 and 1995
respectively. The amount paid by the Back Bay Advisors Bond
Income Series represents approximately 0%, 0% and __% of the
Series' aggregate brokerage commissions in 1993, 1994 and 1995,
respectively. The amount paid by the Alger Equity Growth Series
represents approximately 100% and ___% of that Series' aggregate
brokerage commissions for the period October 31, 1994 to December
31, 1994 and for the year ended December 31, 1995.
DESCRIPTION OF THE FUND
The Fund is organized as a Massachusetts business trust
under the laws of Massachusetts pursuant to an Agreement and
Declaration of Trust (the "Declaration of Trust") dated December
16, 1986. On February 27, 1987, the Fund succeeded to the
operations of The New England Zenith Fund, Inc., a Massachusetts
corporation incorporated on January 7, 1983 as NEL Series Fund,
Inc. On November 1, 1985, the name of that corporation was
changed to Zenith Fund, Inc. and on July 17, 1986 it was changed
again to The New England Zenith Fund, Inc. The Capital Growth,
Back Bay Advisors Bond Income and Back Bay Advisors Money Market
Series all commenced investment operations in 1983. The Westpeak
Stock Index Series commenced operations on March 30, 1987. The
Back Bay Advisors Managed Series commenced investment operations
on May 1, 1987. The Loomis Sayles Avanti Growth and the Westpeak
Value Growth Series commenced investment operations in April
1993. The Loomis Sayles Small Cap Series commenced investment
operations on May 1, 1994. The Alger Equity Growth, Draycott
International Equity, Venture Value, Loomis Sayles Balanced,
Salomon Brothers Strategic Bond Opportunties and Salomon Brothers
U.S. Government Series commenced investment operations on October
31, 1994.
The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of each of the
Loomis Sayles Small Cap, Draycott International Equity, Alger
Equity Growth, Capital Growth, Loomis Sayles Avanti Growth,
Venture Value, Westpeak Value Growth, Westpeak Stock Index,
Loomis Sayles Balanced, Back Bay Advisors Managed, Salomon
Brothers Strategic Bond Opportunities, Back Bay Advisors Bond
Income, Salomon Brothers U.S. Government and Back Bay Advisors
Money Market Series. Interests in the Fund portfolios described
in the Prospectus and in this Statement of Additional Information
are represented by shares of such Series. Each share of a Series
represents an equal proportionate interest in such Series with
each other share and is entitled to a proportionate interest in
the dividends and distributions from such Series. The shares of
the Series do not have any preemptive rights. Upon liquidation
of any Series, whether pursuant to liquidation of the Fund or
otherwise, shareholders of such Series are entitled to share pro
rata in the net assets of such Series available for distribution
to shareholders. The Declaration of Trust also permits the
trustees to charge shareholders directly for custodial, transfer
agency and servicing expenses.
The Declaration of Trust also permits the Trustees, without
shareholder approval, to subdivide any series of shares into
various sub-series of shares with such dividend preferences and
other rights as the trustees may designate. While the trustees
have no current intention to exercise this power, it is intended
to allow them to provide for an equitable allocation of the
impact of any future regulatory requirements which might affect
various classes of shareholders differently. The trustees may
also, without shareholder approval, establish one or more
additional separate portfolios for investments in the Fund or
merge two or more existing portfolios. Shareholders' investments
in such a portfolio would be evidenced by a separate series of
shares. The Fund is a "series" company as that term is used in
Section 18(f) of the 1940 Act.
The Declaration of Trust provides for the perpetual
existence of the Fund. The Fund or any Series, however, may be
terminated at any time by vote of at least two-thirds of the
outstanding shares of each Series affected. The Declaration of
Trust further provides that the trustees may terminate the Fund
or any Series upon written notice to the shareholders thereof.
The assets received by the Fund for the issue or sale of
shares of each Series and all income, earnings, profits, losses
and proceeds therefrom, subject only to the rights of creditors,
are allocated to that Series, and constitute the underlying
assets of the Series. The underlying assets of each Series are
segregated and are charged with the expenses in respect of that
Series and with a share of the general expenses of the Fund. Any
general expenses of the Fund not readily identifiable as
belonging to a particular Series are allocated by or under the
direction of the trustees in such manner as the trustees
determine to be fair and equitable. While the expenses of the
Funds are allocated to the separate books of account of each
Series, certain expenses may be legally chargeable against the
assets of all Series.
As of December 31, 1995, all of the outstanding voting
securities of the Fund are owned by separate accounts of The New
England and/or NEVLICO, and may, from time to time, be owned by
those separate accounts and the general account of The New
England. Therefore, The New England and NEVLICO are presumed to
be in control (as that term is defined in the 1940 Act) of the
Fund. However, the staff of the SEC is presently of the view
that The New England and NEVLICO are each required to vote their
Fund shares that are held in a registered separate account (and,
to the extent voting privileges are granted by the issuing
insurance company, in unregistered separate accounts) in the same
proportion as the voting instruction received from owners of the
variable life insurance or variable annuity contracts issued by
the separate account, and that The New England is required to
vote any shares held in its general account (or in any
unregistered separate account for which voting privileges were
not extended) in the same proportion as all other Fund shares are
voted. The New England and NEVLICO currently intend to vote
their shares in a manner consistent with this view.
Voting Rights
Fund shareholders are entitled to one vote for each full
share held (with fractional votes for fractional shares held).
NEVLICO and The New England are the legal owners of shares
attributable to variable life insurance and variable annuity
contracts issued by their separate accounts, and have the right
to vote those shares. Pursuant to the current view of the SEC
staff, NEVLICO and The New England will vote their shares in
accordance with instructions received from owners of variable
life insurance and variable annuity contracts issued by separate
accounts that are registered under the 1940 Act. All Fund shares
held by separate accounts of NEVLICO and The New England that are
registered with the SEC (and, to the extent voting privileges are
granted by the issuing insurance company, by unregistered
separate accounts) for which no timely instructions are received
will be voted for, voted against, or withheld from voting on any
proportion in the same proportion as the shares held in that
separate account for all contracts for which voting instructions
are recieved. All Fund shares held by the general investment
account (or any unregistered separate account for which voting
privileges are not extended) of NEVLICO or The New England will
be voted in the same proportion as the aggregate of (i) the
shares for which voting instructions are received and (ii) the
shares that are voted in proportion to such voting instructions
are received.
There will normally be no meetings of shareholders for the
purpose of electing trustees except that in accordance with the
1940 Act (i) the Fund will hold a shareholders' meeting for the
election of trustees at such time as less than a majority of the
trustees holding office have been elected by shareholders and
(ii) if, as a result of a vacancy in the Board of Trustees, less
than two-thirds of the trustees holding office have been elected
by the shareholders, that vacancy may only be filled by a vote of
the shareholders. In addition, trustees may be removed from
office by a written consent signed by the holders of two-thirds
of the outstanding shares at a meeting duly called for the
purpose, which meeting shall be held upon the written request of
the holders of not less than 10% of the outstanding shares. Upon
written request by the holders of shares having a net asset value
constituting 1% of the outstanding shares stating that such
shareholders wish to communicate with the other shareholders for
the purpose of obtaining the signatures necessary to demand a
meeting to consider removal of a trustee, the Fund has undertaken
to provide a list of shareholders or to disseminate appropriate
materials (at the expense of the requesting shareholders).
Except as set forth above, the trustees shall continue to hold
office and may appoint successor trustees.
No amendment may be made to the Declaration of Trust without
the affirmative vote of a majority of the outstanding shares of
the Fund except (i) to change the Fund's name or to cure
technical problems in the Declaration of Trust and (ii) to
establish, designate or modify new and existing series or sub-
series of Fund shares or other provisions relating to Fund shares
in response to applicable laws or regulations.
Shareholder and Trustee Liability
Under Massachusetts law shareholders could, under certain
circumstances, be held personally liable for the obligations of
the Fund. However, the Declaration of Trust disclaims
shareholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by
the Fund or the trustees. The Declaration of Trust provides for
indemnification out of the relevant Series' property for all loss
and expense of any shareholder held personally liable for the
obligations of the Series in which the shareholder owns shares.
Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is considered remote since it is
limited to circumstances in which the disclaimer is inoperative
and a Series itself would be unable to meet its obligations. For
purposes of such liability, the Fund's shareholders are the
separate accounts investing directly in the Fund and not the
owners of variable life insurance or variable annuity contracts
or purchasers of other insurance products.
The Declaration of Trust further provides that the trustees
will not be liable for errors of judgment or mistakes of fact or
law. However, nothing in the Declaration of Trust protects a
trustee against any liability to which the trustee would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of his or her office. The By-Laws of the Fund
provide for indemnification by the Fund of the trustees and
officers of the Fund except with respect to any matter as to
which any such person did not act in good faith in the reasonable
belief that his or her action was in or not opposed to the best
interests of the Fund. Such person may not be indemnified
against any liability to the Fund or the Fund's shareholders to
which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office.
APPENDIX A-1
DESCRIPTION OF BOND RATINGS
Moody's Investors Service, Inc.
Aaa
Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge". Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuations of protective elements may
be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities. See Note 1.
A
Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment sometime in the future. See Note
1.
Baa
Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. See Note 1.
Ba
Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often, the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B
Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca
Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Should no rating be assigned by Moody's, the reason may be one of
the following:
(1) An application for rating was not received or accepted.
(2) The issue or issuer belongs to a group of securities
that are not rated as a matter of policy.
(3) There is a lack of essential data pertaining to the
issue or issuer.
(4) The issue was privately placed, in which case the
rating is not published in Moody's publications.
_________________
Note 1: This rating may include the numerical modifier 1, 2 or 3
to provide a more precise indication of relative debt quality
within the category, with 1 indicating the high end of the
category, 2 the mid-range and 3 nearer the low end.
Standard & Poor's Ratings Group
AAA
This is the highest rating assigned by Standard & Poor's
Corporation ("S&P") to a debt obligation and indicates an
extremely strong capacity to pay principal and interest.
AA
Bonds rated AA also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the
majority of instances they differ from AAA issues only in small
degree.
A
Bonds rated A have strong capacity to pay principal and interest
although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
BBB
Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to
pay principal and interest for bonds in this category than for
bonds in the A category.
BB, B, CCC, CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and CC
the highest degree of speculation. While such bonds will likely
have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to
adverse conditions.
C
The rating C is reserved for income bonds on which no interest is
being paid.
D
Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
APPENDIX A-2
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Standard & Poor's Corporation
A-1
Commercial paper rated A-1 by S&P has the following
characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better. The
issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend
with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of
management are unquestioned. Commercial paper within the A-1
category which has overwhelming safety characteristics is denoted
"A-1+."
A-2
Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as
overwhelming as for issues designated A-1.
Moody's Investors Service, Inc.
P-1
The rating P-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer;
(2) economic evaluation of the issuer's industry or
industries and an appraisal of speculative-type risks which may
be inherent in certain areas;
(3) evaluation of the issuer's products in relation to
competition and customer acceptance;
(4) liquidity;
(5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years;
(7) financial strength of a parent company and the
relationships which exist with the issuer; and
(8) recognition by the management of obligations which may
be present or may arise as a result of public interest questions
and preparations to meet such obligations.
P-2
Issuers rated P-2 have a strong capacity for repayment of short-
term promissory obligations. This will normally be evidenced by
many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions.
Ample alternative liquidity is maintained.
APPENDIX B
ABC and affiliates
Atlanta Constitution
Atlanta Journal
Austin American Statesman
Baltimore Sun
Barron's
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghue's Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Financial News Network
Financial Planning
Financial Services Week
Financial World
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Institutional Investor
Investment Dealers Digest
Investment Vision
Investor's Daily
Journal of Commerce
Kansas City Star
LA Times
Leckey, Andrew (syndicated column)
Life Association News
Miami Herald
Milwaukee Sentinel
Money
Money Maker
Money Management Letter
Morningstar
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rukeyser's Business (syndicated column)
Sacramento Bee
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
UPI
US News and World Report
USA Today
Value Line
Wall St. Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
Worth Magazine
WRKO
APPENDIX C
FINANCIAL STATEMENTS AND REPORTS OF INDEPENDENT ACCOUNTANTS
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--82.3% OF TOTAL NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--1.2%
14,800 Whittaker Corp.(c)....................................... $ 321,900
-----------
AUTOMOBILE & RELATED--1.9%
18,100 Masland Corp............................................. 253,400
7,000 Strattec Security Corp.(c)............................... 124,250
500 Tower Automotive(c)...................................... 8,750
7,800 Walbro Corp.............................................. 140,400
-----------
526,800
-----------
BANKS--SAVINGS & LOAN--3.2%
12,000 Charter One Financial, Inc. ............................. 367,500
6,150 Commercial Federal Corp. ................................ 232,163
7,500 First Financial Corp. ................................... 172,500
9,100 First Savings Bank of Washington Bancorp. ............... 119,437
-----------
891,600
-----------
BUSINESS SERVICES--2.4%
9,200 CDI Corp.(c)............................................. 165,600
6,800 Career Horizons, Inc.(c)................................. 229,500
5,500 Cort Business Services Corp.(c).......................... 90,750
6,900 W.H. Brady Co. .......................................... 186,300
-----------
672,150
-----------
CHEMICALS--SPECIALTY--2.7%
5,300 Cambrex Corp............................................. 219,288
3,700 Cytec Industries, Inc.(c)................................ 230,787
5,600 Intertape Polymer Group, Inc. ........................... 175,700
6,000 Learonal, Inc. .......................................... 138,000
-----------
763,775
-----------
COMPUTER SOFTWARE & SERVICES--2.3%
4,000 Analysts Internation Corp................................ 120,000
8,200 Control Data Systems, Inc.(c)............................ 160,925
7,200 MDL Information System, Inc.(c).......................... 165,600
3,200 SPSS, Inc.(c)............................................ 62,400
2,300 Sterling Software, Inc.(c)............................... 143,462
-----------
652,387
-----------
ELECTRICAL EQUIPMENT--1.5%
9,100 Gasonics International Corp.(c).......................... 122,850
21,900 Numerex Corp.(c)......................................... 142,350
10,400 Woodhead Industries...................................... 148,200
-----------
413,400
-----------
ELECTRONIC COMPONENTS--3.3%
6,100 Amphenol Corp.(c)........................................ 147,925
3,000 Burr Brown Corp.(c)...................................... 76,500
700 Dallas Semiconductor Corp. .............................. 14,525
18,700 Dynatech Corp.(c) ....................................... 317,900
6,500 Unitrode Corp.(c)........................................ 183,625
5,100 Zilog, Inc.(c)........................................... 186,788
-----------
927,263
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
ENVIROMENTAL SERVICES--2.0%
7,100 United Waste Systems, Inc.(c)............................ $ 264,475
18,400 World Fuel Services Corp. ............................... 292,100
-----------
556,575
-----------
FINANCIAL SERVICES--3.7%
6,000 Cityscape Financial Corp................................. 124,500
16,200 DVI(c)................................................... 226,800
4,900 Eaton Vance Corp......................................... 138,425
10,600 Imperial Credit Industries, Inc.(c)...................... 230,550
264 Investors Financial Services Co.(c)...................... 5,470
14,800 WFS Financial, Inc.(c)................................... 288,600
-----------
1,014,345
-----------
FOOD--0.7%
5,200 Universal Foods Corp..................................... 208,650
-----------
FREIGHT TRANSPORTATION--3.0%
9,300 ABC Rail Products Corp.(c)............................... 205,762
18,200 Harper Group, Inc........................................ 323,050
15,500 TNT Freightways Corp..................................... 311,938
-----------
840,750
-----------
HEALTH CARE--MEDICAL TECHNOLOGY--3.6%
9,000 Conmed Corp.(c).......................................... 225,000
11,600 Gelman Sciences, Inc.(c)................................. 292,900
2,000 Lunar Corp.(c)........................................... 55,000
15,100 Sofamor/Danek Group, Inc.(c)............................. 428,462
-----------
1,001,362
-----------
HEALTH CARE--SERVICES--6.2%
11,100 Community Health Systems, Inc.(c)........................ 395,438
19,945 Grancare, Inc.(c)........................................ 289,202
14,900 Health Images, Inc....................................... 108,025
5,000 Healthplan Services Corp.(c)............................. 125,000
8,900 Medisense, Inc.(c)....................................... 281,463
24,300 Regency Health Services(c)............................... 246,037
8,500 Sierra Health Services, Inc.(c).......................... 269,875
-----------
1,715,040
-----------
HOME PRODUCTS--3.4%
5,000 Aptargroup, Inc. ........................................ 186,875
6,300 Bush Boake Allen, Inc.(c)................................ 172,463
17,550 Inbrand Corp.(c)......................................... 289,575
21,150 US Can Corp.(c).......................................... 285,525
-----------
934,438
-----------
HOTELS & RESTAURANTS--0.1%
3,000 Supertel Hospitality, Inc.(c)............................ 30,000
-----------
HOUSING & BUILDING MATERIALS--3.6%
20,200 Congoleum Corp........................................... 217,150
10,500 Crossman Communities, Inc.(c)............................ 196,875
16,100 Giant Cement Holdings, Inc.(c)........................... 185,150
12,400 Toro Co.................................................. 407,650
-----------
1,006,825
-----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
INSURANCE--7.1%
10,200 Allied Group, Inc........................................ $ 367,200
5,300 Amerin Corp.(c).......................................... 141,775
12,200 Capital Resource Corp.................................... 375,150
3,600 Meadrowbrook Insurance Group(c).......................... 120,600
10,600 Protective Life Corp..................................... 331,250
11,900 Reinsurance Group of America, Inc. ...................... 435,837
7,150 Triad Guaranty, Inc.(c).................................. 189,475
-----------
1,961,287
-----------
LEISURE--0.6%
4,095 Harman International..................................... 164,312
-----------
MACHINERY--3.5%
7,700 Greenfield Industries, Inc............................... 240,625
8,700 Hardinge Bros, Inc....................................... 226,200
14,900 Keystone International, Inc.............................. 298,000
5,400 Wolverine Tube, Inc.(c).................................. 202,500
-----------
967,325
-----------
MEDIA & ENTERTAINMENT--2.2%
7,200 Banta Corp............................................... 316,800
6,900 Houghton Mifflin Co...................................... 296,700
-----------
613,500
-----------
METALS--3.6%
15,200 Citation Corp.(c)........................................ 182,400
5,500 Cleveland Cliffs, Inc. .................................. 225,500
10,300 Quanex Corp.............................................. 199,563
19,300 Republic Engineered Steels(c)............................ 89,262
33,800 UNR Industries, Inc. .................................... 291,525
-----------
988,250
-----------
MULTI-INDUSTRY--1.6%
36,000 Griffon Corp.(c)......................................... 324,000
3,700 Insilco Corp.(c)......................................... 117,937
-----------
441,937
-----------
OIL--INDEPENDENT PRODUCERS--4.2%
18,100 Belden & Blake Corp.(c).................................. 316,750
13,400 Cross Timbers Oil Co..................................... 236,175
19,400 Lomak Petroleum, Inc.(c)................................. 189,150
19,100 Vintage Petroleum, Inc................................... 429,750
-----------
1,171,825
-----------
OIL--SERVICES--2.5%
3,000 Global Industries, Inc.(c)............................... 90,000
17,900 Pride Petroleum Services, Inc.(c)........................ 190,188
11,400 Seitel, Inc.(c).......................................... 403,275
-----------
683,463
-----------
PAPER PRODUCTS--1.1%
15,000 Caraustar Industries, Inc................................ 300,000
-----------
REAL-ESTATE INVESTMENT TRUSTS--6.2%
18,700 Capstone Capital Corp.(c)................................ 357,638
17,800 Chateau Properties, Inc.................................. 400,500
12,600 HGI Realty, Inc.......................................... 288,225
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
17,000 Liberty Property.................................... $ 352,750
12,700 Patriot American Hospitality(c)..................... 327,025
-----------
1,726,138
-----------
RETAIL--3.4%
7,200 Borders Group, Inc.(c).............................. 133,200
18,050 Cato Corp. Class A(c)............................... 139,887
1,200 Claire Speciality Stores............................ 21,150
21,800 Cole National Corp.(c).............................. 302,475
13,000 Haverty Furniture Companies, Inc.................... 180,375
6,800 Office Max, Inc.(c)................................. 152,150
-----------
929,237
-----------
TELECOMMUNICATIONS--0.3%
6,800 Davel Communications Group(c)....................... 91,800
-----------
TEXTILE & APPAREL--1.2%
7,900 Jones Apparel Group(c).............................. 311,063
-----------
Total Common Stocks
(Identified Cost $20,587,015)...................... 22,827,397
-----------
SHORT-TERM INVESTMENTS--18.4%
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
COMMERICAL PAPER--18.4%
$1,311,233 Associates Corp. NA, 5.954%,
1/02/96............................................ 1,311,233
1,300,000 Chevron Oil Finance Co., 5.754%, 1/02/96............ 1,300,000
1,300,000 Exxon Asset Management, 5.553%, 1/02/96............. 1,300,000
1,200,000 General Electric Capital Corp., 5.553%, 1/02/96..... 1,200,000
-----------
Total Short-Term Investments
(Identified Cost $5,111,233)....................... 5,111,233
-----------
Total Investments--100.7%
(Identified Cost $25,698,248)(b)................... 27,938,630
Cash and Receivables................................ 673,358
Liabilities......................................... (870,842)
-----------
TOTAL NET ASSETS--100%.............................. $27,741,146
===========
(a) See Note 1A.
(b) Federal Tax Information:
At December 31,1995 the net unrealized appreciation on investments based on
cost of $25,700,577 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost...................................... $ 2,764,087
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value......................................... (526,034)
-----------
Net unrealized appreciation......................... $ 2,238,053
===========
</TABLE>
(c) Non-income producing security.
See accompanying notes to financial statements.
4
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value..................................... $27,938,630
Receivable for:
Fund shares sold......................................... 79,549
Securities sold.......................................... 534,881
Dividends and interest................................... 41,863
Due from advisor......................................... 17,065
-----------
28,611,988
LIABILITIES
Payable for:
Securities purchased..................................... $815,769
Fund shares redeemed..................................... 4,675
Accrued expenses:
Management fees.......................................... 12,082
Other expenses........................................... 38,316
--------
870,842
-----------
$27,741,146
===========
NET ASSETS
Net Assets consist of:
Capital paid in.......................................... $25,080,746
Undistributed net investment income...................... 14,855
Accumulated net realized gains........................... 405,163
Unrealized appreciation on investments................... 2,240,382
-----------
NET ASSETS................................................ $27,741,146
===========
Computation of offering price:
Net asset value and redemption price per share
($27,741,146 divided by 233,502 shares of beneficial
interest)................................................ $ 118.80
===========
Identified cost of investments............................ $25,698,248
===========
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................ $ 155,166
Interest................................................. 178,490
----------
333,656
EXPENSES
Management fees.......................................... $147,104
Trustees' fees and expenses.............................. 15,050
Custodian................................................ 84,932
Audit and tax services................................... 11,400
Legal.................................................... 11,958
Printing................................................. 8,923
Registration............................................. 7
Miscellaneous............................................ 3,577
--------
Total expenses.......................................... 282,951
Less expenses assumed by the investment adviser......... (135,845) 147,106
-------- ----------
NET INVESTMENT INCOME..................................... 186,550
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments--net........................ 1,462,220
Unrealized appreciation on investments--net.............. 2,281,753
----------
Net gain on investment transactions....................... 3,743,973
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS................ $3,930,523
==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1, 1994 (A)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
--------------- ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income......................... $ 4,483 $ 186,550
Net realized gain on investments.............. 455 1,462,220
Unrealized appreciation (depreciation) on in-
vestments.................................... (41,371) 2,281,753
---------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERA-
TIONS........................................ (36,433) 3,930,523
---------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income......................... (4,709) (171,695)
Net realized gain on investments.............. 0 (1,055,203)
---------- -----------
(4,709) (1,226,898)
---------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares.................. 5,264,621 25,462,402
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income...... 4,709 171,695
Distributions from net realized gain.......... 0 1,055,203
---------- -----------
5,269,330 26,689,300
Cost of shares redeemed....................... (2,123,311) (4,756,656)
---------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS........................... 3,146,019 21,932,644
---------- -----------
TOTAL INCREASE IN NET ASSETS.................. 3,104,877 24,636,269
NET ASSETS
Beginning of the year......................... 0 3,104,877
---------- -----------
End of the year............................... $3,104,877 $27,741,146
========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year......................... $ 0 $ 0
========== ===========
End of the year............................... $ 0 $ 14,855
========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares................ 95,218 234,111
Issued in connection with the reinvestment of:
Distributions from net investment income...... 49 1,477
Distributions from net realized gain.......... 0 9,076
---------- -----------
95,267 244,664
Redeemed...................................... (63,128) (43,301)
---------- -----------
Net change.................................... 32,139 201,363
========== ===========
(a) Commencement of Operations
FINANCIAL HIGHLIGHTS
<CAPTION>
MAY 2, 1994*
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
--------------- ------------
<S> <C> <C>
Net Asset Value, Beginning of Year............. $ 100.00 $ 96.61
---------- -----------
Income From Investment Operations
Net Investment Income......................... 0.14 0.85
Net Realized and Unrealized Gain (Loss) on In-
vestments.................................... (3.38) 26.93
---------- -----------
Total From Investment Operations.............. (3.24) 27.78
---------- -----------
Less Distributions
Distributions From Net Investment Income...... (0.15) (0.78)
Distributions From Net Realized Capital Gains. 0.00 (4.81)
---------- -----------
Total Distributions........................... (0.15) (5.59)
---------- -----------
Net Asset Value, End of Year................... $ 96.61 $ 118.80
========== ===========
TOTAL RETURN (%)............................... (3.23)*** 28.88
Ratio of Operating Expenses to Average Net As-
sets (%)...................................... 1.00** .99
Ratio of Net Investment Income to Average Net
Assets (%).................................... 0.32** 1.26
Portfolio Turnover Rate (%).................... 80** 98
Net Assets, End of Year (000).................. $ 3,105 $ 27,741
The ratios of expenses to average net assets
without giving effect to the voluntary expense
limitations described in Note 4 to the Finan-
cial Statements would have been (%)........... 2.31** 1.91
</TABLE>
* Commencement of operations.
** Computed on an annualized basis.
*** Not computed on an annualized basis.
See accompanying notes to financial statements.
6
<PAGE>
NEW ENGLAND ZENITH FUND
(DRAYCOTT INTERNATIONAL EQUITY SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--92.4% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AUSTRALIA--4.4%
6,300 Advance Bank Australia................................... $ 50,479
4,200 Amcor Ltd. .............................................. 29,657
4,900 Broken Hill Property..................................... 69,199
19,400 CSR Ltd. ................................................ 63,157
19,750 Fairfax (John)........................................... 41,103
3,800 Lend Lease Corp. ........................................ 55,077
8,900 Mayne Nickless Ltd. ..................................... 39,690
5,800 National Australia Bank.................................. 52,163
15,100 News Corporation......................................... 80,584
19,200 North Ltd. .............................................. 53,516
40,800 Normandy Mining Ltd. .................................... 59,135
15,000 QNI Limited.............................................. 31,663
11,300 WMC Limited.............................................. 72,567
6,700 Woolworths Ltd. ......................................... 16,135
-----------
714,125
-----------
FINLAND--1.8%
2,800 Cultor OY................................................ 115,878
1,900 Kymmene Corporation...................................... 50,237
3,500 Nokia (AB) OY............................................ 135,191
-----------
301,306
-----------
GERMANY--6.0%
1,600 Adidas................................................... 84,657
100 Boss (Hugo) AG........................................... 83,025
710 Mannesmann AG............................................ 226,042
530 Hoechst AG............................................... 143,723
280 Siemens AG............................................... 153,224
1,530 SGL Carbon............................................... 118,390
3,810 Veba Ag. ................................................ 161,749
-----------
970,810
-----------
GREAT BRITAIN--25.4%
104,500 ASDA Group............................................... 180,144
23,200 BAT Industries........................................... 204,293
4,750 Barclays................................................. 54,442
14,100 Bass..................................................... 157,336
15,150 British Aerospace........................................ 187,243
14,150 British Airways.......................................... 102,406
25,650 British Telecommunication................................ 140,619
15,700 British Sky Broadcast.................................... 99,116
40,600 Burton Group............................................. 84,807
47,450 Caradon PLC.............................................. 144,067
11,250 Commercial Union......................................... 109,722
24,850 Compass Group............................................ 189,105
22,000 Courtaulds............................................... 138,888
24,800 General Electric......................................... 136,344
17,150 Glaxo Welcome............................................ 243,706
77,600 Ladbroke Group........................................... 176,555
36,990 LLoyds TSB Group......................................... 190,436
12,800 Pearson.................................................. 123,945
35,100 Pillar Properties Inv. .................................. 77,406
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
13,150 Prudential Corporation................................... $ 84,651
14,400 Reed International....................................... 219,500
9,715 Shell Transportation & Trading........................... 128,472
15,800 Smithkline Beecham....................................... 174,220
33,650 Telewest Communications.................................. 81,003
21,500 Ti Group................................................. 153,094
6,265 Thorn EmI................................................ 147,552
28,950 Tomkins.................................................. 126,564
17,450 United News & Media PLC.................................. 150,255
26,100 Williams Holdings........................................ 132,750
-----------
4,138,641
-----------
ITALY--4.8%
54,750 BCA Fideuram SPA......................................... 63,261
14,200 Burgo (Cartiere) SA...................................... 70,860
92,200 Credito Italiano......................................... 107,403
7,900 Edison................................................... 34,025
26,900 Eni SPA.................................................. 94,007
155,750 Olivetti and C SPA....................................... 124,845
18,400 RAS...................................................... 112,905
24,350 Saipem................................................... 56,117
75,760 Telecom Italia Mob....................................... 79,666
15,760 Unicem (Union Cem)....................................... 39,992
-----------
783,081
-----------
JAPAN--33.3%
9,000 Asahi Glass Co. ......................................... 100,242
19,000 Asahi Bank............................................... 239,225
6,000 Bank of Tokyo............................................ 105,182
7,000 Canon Inc. .............................................. 126,780
9,000 Dai Nippon Printing...................................... 152,542
4,000 Daiwa Securities......................................... 61,211
13 East Japan Railway....................................... 63,206
12,000 Fuji Bank................................................ 264,988
2,000 Hitachi.................................................. 20,145
7,000 Honda Motor Co. ......................................... 144,407
7,000 Isetan Co. .............................................. 115,254
28,000 Ishikawajima Har......................................... 117,966
7,000 Kirin Brewery Co. ....................................... 82,712
12,000 Matsushita Electronic Industries......................... 195,254
11,000 Mitsubishi Bank.......................................... 258,886
11,000 Mitsubishi Corp. ........................................ 135,303
16,000 Mitsubishi Chemical...................................... 77,792
11,000 Mitsubishi Heavy Industrial.............................. 87,680
9,000 Mitsui + Co. ............................................ 78,973
19,000 MItsukoshi............................................... 178,499
11,000 Mitsui Fudosan Co. ...................................... 135,303
6,000 Nippondenso Co. ......................................... 112,155
39,000 Nippon Steel Corp. ...................................... 133,714
6,000 Nomura Securities........................................ 130,751
19,000 Odakyu Electric Railway.................................. 129,734
9,000 Okumura Corporation...................................... 81,937
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
NEW ENGLAND ZENITH FUND
(DRAYCOTT INTERNATIONAL EQUITY SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED) SHORT-TERM INVESTMENTS--5.3%
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
JAPAN--(CONTINUED)
9,000 Onward Kkashiyama...................................... $ 146,441
9,000 Ricom Company.......................................... 98,499
9,000 Sakura Bank............................................ 114,189
11,000 Sanwa Bank............................................. 223,729
5,000 Sony Corp.............................................. 299,758
12,000 Sumitomo Bank.......................................... 254,528
1,000 Sumitomo Marine & Fire................................. 8,213
15,000 Sumitomo Realty & Development.......................... 106,053
12,000 Sumitomo Rubber........................................ 100,184
7,000 Takashimaya Co. ....................................... 111,864
15,000 Tokai Bank............................................. 209,200
4,000 Toto................................................... 55,787
11,000 Yakult Honsha Co. ..................................... 150,218
10,000 Yamanouchi Pharmaceutical.............................. 215,012
-----------
5,423,516
-----------
NETHERLAND--4.8%
1,900 Akzo Nobel NV.......................................... 219,755
3,500 Fortis Amev NV......................................... 234,468
1,100 Nutricia Ver Berdj..................................... 88,976
2,600 N V Koninklijke Sphinx Gus............................. 50,227
5,300 Philips Electronic..................................... 191,562
-----------
784,988
-----------
NORWAY--1.5%
1,880 Kvaerner AS............................................ 66,485
3,300 Norske Skogsindust..................................... 91,173
6,000 Schibsted A/S.......................................... 81,464
-----------
239,122
-----------
SPAIN--5.2%
1,755 Acerinox SA............................................ 177,526
3,400 BCO Santander SA....................................... 170,700
1,550 Gas Natural Sdg SA..................................... 241,509
35,500 Sevillana de Elec...................................... 275,688
-----------
865,423
-----------
SWITZERLAND--5.2%
263 Alusuisse Lonza HD..................................... 208,394
36 Roche Holdings AG...................................... 284,785
100 Sandoz AG.............................................. 91,547
904 Zurich Versicherun..................................... 270,377
-----------
855,103
-----------
Total Common Stocks
(Identified Cost $14,217,725)......................... 15,076,115
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$865,000 Repurchase agreement with State Street Bank & Trust
Company dated 12/29/95 at 5.000% to be repurchased at
$865,480 on 1/2/96 collateralized by $865,000
U.S.Treasury Notes 8.00%, due 8/15/99 with a value of
$1,009,891........................................... $ 865,000
-----------
Total Short-Term Investments
(Identified Cost $865,000)........................... 865,000
-----------
Total Investments--97.7%
(Identified Cost $15,082,725)........................ 15,941,115
Cash and Receivables(c)............................... 418,547
Liabilities........................................... (92,155)
-----------
TOTAL NET ASSETS--100%................................ $16,267,507
===========
(a) See Note 1a.
(b) Federal Tax Information:
At December 31, 1995 the net unrealized appreciation on investments based on
cost of $15,104,781 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost............................................. $ 1,138,334
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value........................................... (302,000)
-----------
Net unrealized appreciation........................... $ 836,334
===========
</TABLE>
As of December 1995, the Series had a net tax basis capital loss
carryforward as follows:
Expiring December 31, 2002 $323
Expiring December 31, 2003 $50,456
(c) Including deposits in foreign denominated currencies with a value of
$252,491 and a cost of $253,850.
TEN LARGEST INDUSTRY HOLDINGS AT DECEMBER 31, 1995
<TABLE>
<S> <C>
Banking.................................................................... 14.6
Consumer Basics............................................................ 12.6
Basic Industries........................................................... 10.7
Miscellaneous Industries................................................... 6.7
Consumer Non-Durables...................................................... 6.7
Capital Goods.............................................................. 6.3
Finance.................................................................... 6.3
Consumer Durables.......................................................... 6.1
Utilities.................................................................. 5.8
Communications............................................................. 4.4
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
NEW ENGLAND ZENITH FUND
(DRAYCOTT INTERNATIONAL EQUITY SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value..................................... $15,941,115
Cash..................................................... 567
Foreign cash at value.................................... 252,491
Receivable for:
Fund shares sold......................................... 88,653
Dividends and interest................................... 19,415
Foreign taxes............................................ 13,223
Due from advisor......................................... 36,493
Unamortized organization expense......................... 7,705
-----------
16,359,662
LIABILITIES
Payable for:
Securities purchased..................................... $29,374
Fund shares redeemed..................................... 80
Withholding Taxes........................................ 2,656
Accrued expenses:
Management fees.......................................... 5,181
Other expenses........................................... 54,864
-------
92,155
-----------
$16,267,507
===========
NET ASSETS
Net Assets consist of:
Capital paid in.......................................... $15,581,805
Distributions in excess of net investment income......... (6,800)
Accumulated net realized losses.......................... (164,529)
Unrealized appreciation on investments, forward contracts
and foreign currency.................................... 857,031
-----------
NET ASSETS................................................ $16,267,507
===========
Computation of offering price:
Net asset value and redemption price per share
($16,267,507 divided by 1,516,717 shares of beneficial
interest)................................................ $ 10.73
===========
Identified cost of investments............................ $15,082,725
===========
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends.............................................. $174,150(a)
Interest............................................... 72,866
--------
247,016
EXPENSES
Management fees........................................ $ 85,666
Trustees' fees and expenses............................ 15,050
Custodian.............................................. 147,730
Audit and tax services................................. 28,000
Legal.................................................. 10,821
Printing............................................... 4,651
Registration........................................... 7
Insurance.............................................. 98
Amortization of organization expenses.................. 2,347
Miscellaneous.......................................... 3,165
---------
Total expenses........................................ 297,535
Less expenses assumed by the investment adviser....... (173,796) 123,739
--------- --------
NET INVESTMENT INCOME................................... 123,277
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments--net....................................... (205,658)
Foreign currency transactions--net..................... 80,389
---------
Total realized loss on investments and foreign
currency transactions................................ (125,269)
---------
Unrealized appreciation on:
Investments--net....................................... 543,413
Foreign currency transactions--net..................... 255,106
---------
Total unrealized appreciation on investments and
foreign currency transactions........................ 798,519
---------
Net gain on investment transactions..................... 673,250
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS.............. $796,527
========
</TABLE>
(a)Net of foreign taxes of: $26,441
See accompanying notes to financial statements.
11
<PAGE>
NEW ENGLAND ZENITH FUND
(DRAYCOTT INTERNATIONAL EQUITY SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 31, 1994 (A)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
-------------------- ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income...................... $ 7,643 $ 123,277
Net realized loss on investments and for-
eign currency transactions................ (2,176) (125,269)
Unrealized appreciation on investments, and
foreign currency transactions............. 58,511 798,519
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS..... 63,978 796,527
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income...................... (5,791) (123,277)
In excess of net investment income......... 0 (48,516)
Paid in capital............................ (2,628) 0
----------- -----------
(8,419) (171,793)
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares............... 3,566,918 16,189,698
Net asset value of shares issued in connec-
tion with the reinvestment of:
Distributions from net investment income... 5,791 171,793
Distributions from paid in capital......... 2,628 0
----------- -----------
3,575,337 16,361,491
Cost of shares redeemed.................... (1,641,679) (3,707,935)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS........................ 1,933,658 12,653,556
----------- -----------
TOTAL INCREASE IN NET ASSETS............... 1,989,217 13,278,290
NET ASSETS
Beginning of the year...................... 1,000,000 2,989,217
----------- -----------
End of the year............................ $ 2,989,217 $16,267,507
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year...................... $ 0 $ 0
=========== ===========
End of the year............................ $ 0 $ (6,800)
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares............. 355,009 1,564,292
Issued in connection with the reinvestment
of:
Distributions from net investment income... 571 16,055
Distributions from paid in capital......... 257 0
----------- -----------
355,837 1,580,347
Redeemed................................... (163,731) (355,736)
----------- -----------
Net change................................. 192,106 1,224,611
=========== ===========
(a) Commencement of Operations
FINANCIAL HIGHLIGHTS
<CAPTION>
OCTOBER 31, 1994*
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
-------------------- ------------
<S> <C> <C>
Net Asset Value, Beginning of Year.......... $ 10.00 $ 10.23
----------- -----------
Income From Investment Operations
Net Investment Income...................... 0.03 0.09
Net Realized and Unrealized Gain (Loss) on
Investments............................... 0.23 0.53
----------- -----------
Total From Investment Operations........... 0.26 0.62
----------- -----------
Less Distributions
Distributions From Net Investment Income... (0.02) (0.09)
Distributions in Excess of Net Investment
Income.................................... 0.00 (0.03)
Distributions From Paid-in Capital......... (0.01) 0.00
----------- -----------
Total Distributions........................ (0.03) (0.12)
----------- -----------
Net Asset Value, End of Year................ $ 10.23 $ 10.73
=========== ===========
TOTAL RETURN (%)............................ 2.60*** 6.03
Ratio of Operating Expenses to Average Net
Assets (%)................................. 1.30** 1.30
Ratio of Net Investment Income to Average
Net Assets (%)............................. 2.56** 1.29
Portfolio Turnover Rate (%)................. 4** 89
Net Assets, End of Year (000)............... $ 2,989 $ 16,268
The ratios of expenses to average net assets
without giving effect to the voluntary
expense limitations described in Note 4 to
the Financial Statements would have been
(%)........................................ 5.38** 3.12
</TABLE>
* Commencement of operations.
** Computed on an annualized basis.
*** Not computed on an annualized basis.
See accompanying notes to financial statements.
12
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--87.9% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AIRLINES--0.8%
5,000 Delta Air Lines, Inc. .................................... $ 369,375
-----------
APPAREL--0.9%
10,000 Tommy Hilfiger Corp. ..................................... 423,750
-----------
BIO TECHNOLOGY--2.7%
31,000 Biochem Pharmacy, Inc. ................................... 1,243,875
-----------
BUILDING & CONSTRUCTION--1.7%
22,500 Clayton Homes, Inc. ...................................... 480,938
9,200 Pulte Corp. .............................................. 309,350
-----------
790,288
-----------
CASINOS & RESORTS--0.2%
2,800 Mirage Resorts, Inc. ..................................... 96,600
-----------
COMMUNICATIONS--5.5%
13,500 DSC Communications Corp.(c)............................... 497,813
10,000 Glenayre Technologies, Inc. .............................. 622,500
5,400 Tellabs, Inc.(c).......................................... 199,800
8,000 US Robotics, Inc. ........................................ 702,000
11,000 Viacom Inc.--Class B(c)................................... 521,125
-----------
2,543,238
-----------
COMPUTER RELATED & BUSINESS
EQUIPMENT--18.1%
26,750 Bay Networks, Inc. ....................................... 1,100,094
11,500 Cisco Systems, Inc. ...................................... 858,187
9,000 Compaq Computer Corp.(c).................................. 432,000
23,350 Dell Computer Corp. ...................................... 808,494
22,900 Digital Equipment Corp.(c)................................ 1,468,462
19,801 First Data Corp. ......................................... 1,324,192
17,400 Seagate Technology........................................ 826,500
12,600 Summit Technology, Inc. .................................. 425,250
24,900 3Com Corp.(c)............................................. 1,160,962
-----------
8,404,141
-----------
COMPUTER SOFTWARE--1.0%
5,000 Broderbund Software, Inc. ................................ 303,750
6,000 Informix Corporation...................................... 180,000
-----------
483,750
-----------
COMPUTER TECHNOLOGY--1.9%
3,550 Adaptec, Inc. ............................................ 145,550
10,000 America Online, Inc. ..................................... 375,000
10,000 General Datacomm Industries, Inc. ........................ 171,250
6,500 Silicon Graphics, Inc. ................................... 178,750
-----------
870,550
-----------
DEFENSE--3.6%
3,000 Lockheed Martin Corp. .................................... 237,000
14,400 Loral Corp. .............................................. 509,400
10,200 McDonnell Douglas Corp. .................................. 938,400
-----------
1,684,800
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
FINANCE--2.8%
6,900 American International Group, Inc. ....................... $ 638,250
10,600 Travelers Group, Inc. .................................... 666,475
-----------
1,304,725
-----------
FINANCIAL SERVICES--0.7%
4,500 Lehman Brothers Holdings, Inc. ........................... 95,625
4,000 Merrill Lynch & Co., Inc. ................................ 204,000
-----------
299,625
-----------
HEALTH CARE--11.8%
8,400 Apria Health Care Group, Inc. ............................ 237,300
6,000 Boston Scientific Corp. .................................. 294,000
20,000 Cardinal Health, Inc. .................................... 1,095,000
16,400 Columbia/HCA Healthcare Corp. ............................ 832,300
12,000 Genzyme Corp. ............................................ 748,500
3,450 Health Management Assoc., Inc. ........................... 90,131
16,500 Merck & Co., Inc. ........................................ 1,084,875
4,300 Nellcor Puritan Bennett, Inc. ............................ 249,400
20,000 Occusystems, Inc. ........................................ 400,000
7,000 United Healthcare Corp. .................................. 458,500
-----------
5,490,006
-----------
HEALTH CARE--ADMINISTRATIVE
SERVICES--3.0%
33,400 Healthsource, Inc. ....................................... 1,202,400
10,000 Liposome, Inc. ........................................... 200,000
-----------
1,402,400
-----------
HEALTH MAINTENANCE SERVICES--2.5%
15,500 Oxford Health Plans, Inc. ................................ 1,145,062
-----------
MEDICAL SERVICES--0.6%
5,200 Medtronic, Inc. .......................................... 290,550
-----------
MISCELLANEOUS--2.6%
27,000 Service Corp. International............................... 1,188,000
-----------
PHARMECUTICALS--3.7%
16,200 Eli Lilly & Company....................................... 911,250
14,700 Smithkline Beecham PLC.................................... 815,850
-----------
1,727,100
-----------
RESTAURANTS & LODGING--5.9%
14,400 Boston Chicken, Inc. ..................................... 462,600
7,150 Cracker Barrel Old Country Store.......................... 123,338
20,000 La Quinta Inns, Inc. ..................................... 547,500
35,800 Lone Star Steakhouse Saloon............................... 1,373,825
6,000 Outback Steakhouse, Inc. ................................. 215,250
-----------
2,722,513
-----------
RETAILING--6.6%
9,800 Cintas Corp. ............................................. 436,100
10,000 CompUSA, Inc. ............................................ 311,250
56,000 Officemax, Inc. .......................................... 1,253,000
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED) SHORT-TERM INVESTMENTS--16.2%
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
RETAILING--(CONTINUED)
20,000 The Gap, Inc.............................................. $ 840,000
5,000 Viking Office Products, Inc............................... 232,500
-----------
3,072,850
-----------
SEMI-CONDUCTORS--11.3%
27,000 Altera Corp............................................... 1,343,250
17,800 Intel Corp. .............................................. 1,010,150
10,000 LSI Logic Corp............................................ 327,500
15,000 Linear Technology Corporation............................. 588,750
32,600 Maxim Integrated Products, Inc............................ 1,255,100
23,300 Xilinx, Inc............................................... 710,650
-----------
5,235,400
-----------
Total Common Stocks
(Identified Cost $36,287,708)............................ 40,788,598
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$7,504,356 Seven Seas U.S. Government
Money Market Fund........ $ 7,504,356
-----------
Total Short-Term
Investment
(Identified Cost
$7,504,356)................ 7,504,356
-----------
Total Investments--104.1%
(Identified cost
$43,792,064)(b)............ 48,292,954
Receivables............... 266,770
Liabilities............... (2,173,322)
-----------
TOTAL NET ASSETS--100%...... $46,386,402
===========
(a) See Note 1A.
(b) Federal Tax Information:
At December 31, 1995 the net unrealized appreciation on investments based on
cost of $43,809,703 for federal income tax purposes was as follows:
Aggregate gross unrealized
appreciation for all
investments in which
there is an excess of
value over tax cost...... $ 5,430,730
Aggregate gross unrealized
depreciation for all
investments in which
there is an excess of tax
cost over value.......... (947,479)
-----------
Net unrealized
appreciation............. $ 4,483,251
===========
</TABLE>
(c) Non-income producing security.
See accompanying notes to financial statements.
16
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments at value.................................. $48,292,954
Receivable for:
Fund shares sold...................................... 215,212
Dividends and interest................................ 43,853
Unamortized organization expense...................... 7,705
-----------
48,559,724
LIABILITIES
Payable for:
Securities purchased.................................. $2,110,953
Fund shares redeemed.................................. 1,877
Accrued expenses:
Management fees....................................... 21,027
Other expenses........................................ 39,465
----------
2,173,322
-----------
$46,386,402
===========
NET ASSETS
Net Assets consist of:
Capital paid in....................................... $42,729,581
Undistributed net investment income................... 1,354
Accumulated net realized losses....................... (845,423)
Unrealized appreciation on investments................ 4,500,890
-----------
NET ASSETS............................................. $46,386,402
===========
Computation of offering price:
Net asset value and redemption price per share
($46,386,402 divided by 3,362,196 shares of beneficial
interest)............................................. $ 13.80
===========
Identified cost of investments......................... $43,792,064
===========
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 81,944(a)
Interest.............................................. 124,430
----------
206,374
EXPENSES
Management fees....................................... $144,943
Trustees' fees and expenses........................... 15,049
Custodian............................................. 52,793
Audit and tax services................................ 19,800
Legal................................................. 10,821
Printing.............................................. 4,920
Registration.......................................... 7
Amortization of organization expenses................. 2,347
Miscellaneous......................................... 2,575
--------
Total expenses....................................... 253,255
Less expenses assumed by the investment adviser...... (77,254) 176,001
-------- ----------
NET INVESTMENT INCOME.................................. 30,373
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments--net..................... 448,499
Unrealized appreciation on investments--net........... 4,579,507
----------
Net gain on investment transactions.................... 5,028,006
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $5,058,379
==========
</TABLE>
(a) Net of foreign taxes of: $319
See accompanying notes to financial statements.
17
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 31, 1994(A)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------------- ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income....................... $ 3,467 $ 30,373
Net realized gain (loss) on investments..... (7,937) 448,499
Unrealized appreciation (depreciation) on
investments................................ (78,617) 4,579,507
---------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM OPER-
ATIONS..................................... (83,087) 5,058,379
---------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income....................... (3,466) (30,373)
In excess of net investment income.......... (534) (993)
Net realized gain on investments............ 0 (1,285,986)
---------- -----------
(4,000) (1,317,352)
---------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares................ 1,872,491 47,127,562
Net asset value of shares issued in connec-
tion with the reinvestment of:
Distributions from net investment income.... 4,000 31,366
Distributions from net realized gain........ 0 1,285,986
---------- -----------
1,876,491 48,444,914
Cost of shares redeemed..................... (1,872,491) (7,716,452)
---------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS......................... 4,000 40,728,462
---------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..... (83,087) 44,469,489
NET ASSETS
Beginning of the year....................... 2,000,000 1,916,913
---------- -----------
End of the year............................. $1,916,913 $46,386,402
========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year....................... $ 0 $ 0
========== ===========
End of the year............................. $ 0 $ 1,354
========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.............. 220,620 3,648,304
Issued in connection with the reinvestment
of:
Distributions from net investment income.... 421 2,303
Distributions from net realized gain........ 0 94,419
---------- -----------
221,041 3,745,026
Redeemed.................................... (220,620) (583,251)
---------- -----------
Net change.................................. 421 3,161,775
========== ===========
(a) Commencement of Operations
FINANCIAL HIGHLIGHTS
<CAPTION>
OCTOBER 31, 1994*
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------------- ------------
<S> <C> <C>
Net Asset Value, Beginning of Year........... $ 10.00 $ 9.56
---------- -----------
Income From Investment Operations
Net Investment Income....................... 0.02 0.01
Net Realized and Unrealized Gain (Loss) on
Investments................................ (0.44) 4.65
---------- -----------
Total From Investment Operations............ (0.42) 4.66
---------- -----------
Less Distributions
Distributions From Net Investment Income.... (0.02) (0.01)
Distributions From Net Realized Capital
Gains...................................... 0.00 (0.41)
---------- -----------
Total Distributions......................... (0.02) (0.42)
---------- -----------
Net Asset Value, End of Year................. $ 9.56 $ 13.80
========== ===========
TOTAL RETURN (%)............................. (4.20)*** 48.70
Ratio of Operating Expenses to Average Net
Assets (%).................................. 0.85** 0.83
Ratio of Net Investment Income to Average Net
Assets (%).................................. 1.07** 0.14
Portfolio Turnover Rate (%).................. 32** 107
Net Assets, End of Year (000)................ $ 1,917 $ 46,386
The ratios of expenses to average net assets
without giving effect to the voluntary
expense limitations described in Note 4 to
the Financial Statements would have been
(%)......................................... 2.74** 2.45
</TABLE>
* Commencement of operations.
** Computed on an annualized basis.
*** Not computed on an annualized basis.
See accompanying notes to financial statements.
18
<PAGE>
NEW ENGLAND ZENITH FUND
(CAPITAL GROWTH SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--98.5% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--6.1%
721,000 Boeing Co............................................. $ 56,508,375
------------
AIRLINES--9.6%
90,000 AMR Corp.(c).......................................... 6,682,500
680,000 Northwest Airlines Corp.(c)........................... 34,680,000
265,000 UAL Corp.(c).......................................... 47,302,500
------------
88,665,000
------------
BANKS--MONEY CENTER--12.7%
930,000 Chemical Banking Corp. ............................... 54,637,500
926,000 CitiCorp.............................................. 62,273,500
------------
116,911,000
------------
BEVERAGES AND TOBACCO--4.5%
745,000 Pepsico, Inc.......................................... 41,626,875
------------
CHEMICALS--2.4%
423,000 Air Products & Chemicals, Inc......................... 22,313,250
------------
COMPUTER SOFTWARE & SERVICES--4.6%
485,000 Computer Associates International, Inc................ 27,584,375
211,000 Computer Sciences Corp.(c)............................ 14,822,750
------------
42,407,125
------------
DEFENSE--1.9%
220,000 Lockheed Martin Corp. ................................ 17,380,000
------------
DRUGS--13.4%
924,000 Eli Lilly and Co...................................... 51,975,000
775,000 Merck and Company, Inc. .............................. 50,956,250
330,000 Pfizer, Inc........................................... 20,790,000
------------
123,721,250
------------
FINANCIAL SERVICES--1.9%
253,000 First Data Corp....................................... 16,919,375
------------
FOOD--RETAILERS/WHOLERS--5.5%
560,000 Philip Morris Companies, Inc.......................... 50,680,000
------------
FREIGHT TRANSPORTATION--5.2%
611,000 Burlington Northern Santa Fe Corp. ................... 47,658,000
------------
HOME PRODUCTS AND COSMETIC--3.8%
425,000 Procter and Gamble Co. ............................... 35,275,000
------------
INSURANCE--11.9%
1,215,000 Allstate Corp......................................... 49,966,875
638,850 American International Group, Inc. ................... 59,093,625
------------
109,060,500
------------
MACHINERY--2.1%
555,000 Deere & Co............................................ 19,563,750
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
RETAIL--7.8%
820,000 May Department Stores Co. .......................... $ 34,645,000
940,000 Sears Roebuck and Co................................ 36,660,000
------------
71,305,000
------------
MISCELLANEOUS--5.1%
498,000 United Technologies Corp............................ 47,247,750
------------
Total Common Stock
(Identified Cost $780,984,415)..................... 907,242,250
------------
</TABLE>
SHORT-TERM INVESTMENTS--0.6%
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$5,910,000 Chevron Oil Finance Co.
5.7500%, 01/02/96................................. 5,910,000
------------
Total Short-Term Investments
(Identified Cost $5,910,000)...................... 5,910,000
------------
Total Investments--99.1%
(Identified Cost $786,894,415)(b)................. 913,152,250
Cash and Receivables............................... 23,889,162
Liabilities........................................ (15,597,592)
------------
TOTAL NET ASSETS--100%............................. $921,443,820
============
(a) See Note 1A.
(b) Federal Tax Information:
At December 31, 1995 the net unrealized appreciation on investments based on
cost of $788,379,751 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost..................................... $129,236,142
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value................................... (4,463,643)
------------
Net unrealized appreciation........................ $124,772,499
============
</TABLE>
(c) Non-Income producing security.
See accompanying notes to financial statements.
20
<PAGE>
NEW ENGLAND ZENITH FUND
(CAPITAL GROWTH SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................. $913,152,250
Cash................................................. 956
Receivable for:
Fund shares sold..................................... 668,455
Securities sold...................................... 21,702,342
Dividends and interest............................... 1,517,409
------------
937,041,412
LIABILITIES
Payable for:
Securities purchased................................. $14,184,326
Fund shares redeemed................................. 669,835
Accrued expenses:
Management fees...................................... 493,781
Deferred trustees' fees.............................. 44,575
Other expenses....................................... 205,075
-----------
15,597,592
------------
$921,443,820
============
NET ASSETS
Net Assets consist of:
Capital paid in...................................... $775,378,866
Undistributed net investment income.................. 28,556
Accumulated net realized gains....................... 19,778,563
Unrealized appreciation on investments............... 126,257,835
------------
NET ASSETS............................................ $921,443,820
============
Computation of offering price:
Net asset value and redemption price per share
($921,443,820 divided by 2,459,656 shares of
beneficial interest)................................. $ 374.62
============
Identified cost of investments........................ $786,894,415
============
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends.......................................... $ 13,027,061(a)
Interest........................................... 124,993
------------
13,152,054
EXPENSES
Management fees.................................... $5,232,562
Trustees' fees and expenses........................ 41,166
Custodian.......................................... 143,365
Audit and tax services............................. 14,900
Legal.............................................. 8,055
Printing........................................... 240,863
Registration....................................... 7
Miscellaneous...................................... 20,525
----------
Total expenses.................................... 5,701,443
------------
NET INVESTMENT INCOME............................... 7,450,611
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments--net.................. 132,068,325
------------
Unrealized appreciation on investments--net........ 114,117,353
------------
Net gain on investment transactions................. 246,185,678
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS.......... $253,636,289
============
</TABLE>
(a) Net of foreign taxes of: $29,811
See accompanying notes to financial statements.
21
<PAGE>
NEW ENGLAND ZENITH FUND
(CAPITAL GROWTH SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income........................... $ 10,848,989 $ 7,450,611
Net realized gain on investments................ 18,279,890 132,068,325
Unrealized appreciation (depreciation) on in-
vestments...................................... (79,261,045) 114,117,353
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERA-
TIONS.......................................... (50,132,166) 253,636,289
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income........................... (10,566,409) (7,422,072)
Net realized gain on investments................ (19,094,533) (112,289,797)
------------- -------------
(29,660,942) (119,711,869)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares.................... 265,969,106 211,234,567
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income........ 10,556,416 7,422,051
Distributions from net realized gain............ 18,284,122 112,289,762
------------- -------------
294,809,644 330,946,380
Cost of shares redeemed......................... (192,273,754) (210,553,681)
------------- -------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS............................. 102,535,890 120,392,699
------------- -------------
TOTAL INCREASE IN NET ASSETS.................... 22,742,782 254,317,119
NET ASSETS
Beginning of the year........................... 644,383,919 667,126,701
------------- -------------
End of the year................................. $ 667,126,701 $ 921,443,820
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year........................... $ (1,766) $ 278,739
============= =============
End of the year................................. $ 278,739 $ 28,556
============= =============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................. 773,701 561,255
Issued in connection with the reinvestment of:
Distributions from net investment income........ 33,768 19,951
Distributions from net realized gain............ 58,487 301,846
------------- -------------
865,956 883,052
Redeemed........................................ (562,304) (559,603)
------------- -------------
Net change...................................... 303,652 323,449
============= =============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year........................ $ 249.04 $ 347.36 $ 322.23 $ 351.63 $ 312.30
-------- -------- -------- -------- --------
Income From Investment Opera-
tions
Net Investment Income....... 3.16 4.04 2.12 5.28 3.47
Net Realized and Unrealized
Gain (Loss) on Investments. 130.75 (25.10) 46.21 (30.54) 114.91
-------- -------- -------- -------- --------
Total From Investment Opera-
tions...................... 133.91 (21.06) 48.33 (25.26) 118.38
-------- -------- -------- -------- --------
Less Distributions
Distributions From Net In-
vestment Income............ (3.22) (4.07) (2.18) (5.15) (3.48)
Distributions From Net Real-
ized Capital Gains......... (31.93) 0.00 (16.75) (8.92) (52.58)
Distributions From Paid-in
Capital.................... (0.44) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- --------
Total Distributions......... (35.59) (4.07) (18.93) (14.07) (56.06)
-------- -------- -------- -------- --------
Net Asset Value, End of Year. $ 347.36 $ 322.23 $ 351.63 $ 312.30 $ 374.62
======== ======== ======== ======== ========
TOTAL RETURN (%)............. 54.00 (6.05) 14.97 (7.07) 38.03
Ratio of Operating Expenses
to Average Net Assets (%)... 0.70 0.70 0.68 0.67 0.71
Ratio of Net Investment In-
come to Average Net Assets
(%)......................... 1.22 1.53 0.67 1.61 0.92
Portfolio Turnover Rate (%).. 174 207 169 140 242
Net Assets, End of Year
(000)....................... $343,965 $472,017 $644,384 $667,127 $921,444
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES AVANTI GROWTH SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--94.7% OF NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
BANKS--SAVINGS AND LOAN--1.9%
18,500 First Bank System....................................... $ 918,063
-----------
BEVERAGES--3.1%
14,200 Coca Cola Co. .......................................... 1,054,350
8,500 Pepsico, Inc. .......................................... 474,937
-----------
1,529,287
-----------
BUSINESS SERVICES--11.9%
10,000 Checkfree Corp. ........................................ 215,000
14,000 Ceridian Corp.(c)....................................... 577,500
16,700 Cintas Corp. ........................................... 743,150
21,550 CUC International, Inc. ................................ 735,394
12,500 Danka Business Systems.................................. 462,500
15,000 First Data Corp. ....................................... 1,003,125
27,750 Fiserv, Inc. ........................................... 832,500
13,700 Medaphis Corp. ......................................... 506,900
15,000 Paychex, Inc. .......................................... 748,125
-----------
5,824,194
-----------
CHEMICAL--MAJOR--0.7%
6,500 Air Products & Chemicals, Inc. ......................... 342,875
-----------
COMPUTER SOFTWARE & SERVICES--8.6%
6,000 Adobe Systems, Inc. .................................... 372,000
10,900 Autodesk Inc. .......................................... 373,325
5,200 Broderbund Software, Inc. .............................. 315,900
16,500 FTP Software, Inc. ..................................... 478,500
27,000 Informix Corp. ......................................... 810,000
10,500 Microsoft Corp.(c)...................................... 921,375
22,000 Oracle Systems Corp.(c)................................. 932,250
-----------
4,203,350
-----------
ELECTRICAL EQUIPMENT--1.3%
9,000 General Electric Co. ................................... 648,000
-----------
ELECTRONIC COMPONENTS--7.5%
19,000 Intel Corp. ............................................ 1,078,250
16,500 LSI Logic Corp.(c)...................................... 540,375
12,500 Micron Technology....................................... 495,313
10,000 Motorola, Inc. ......................................... 570,000
16,700 Premier Industrial Corp. ............................... 409,150
8,000 Solectron Corp. ........................................ 353,000
4,100 Texas Instruments, Inc. ................................ 212,175
-----------
3,658,263
-----------
FINANCIAL SERVICES--2.1%
10,000 Dean Witter Discover & Co. ............................. 470,000
14,500 MBNA Corp. ............................................. 534,687
-----------
1,004,687
-----------
FOOD--PACKAGED & MISCELLANEOUS--1.9%
8,300 Dreyers Grand Ice Cream, Inc. .......................... 275,975
30,800 Starbucks Corp. ........................................ 646,800
-----------
922,775
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
HEALTH CARE--DRUGS--8.1%
15,200 Amgen, Inc.(c)............................................ $ 902,500
6,600 Johnson & Johnson......................................... 565,125
16,500 Merck & Co. .............................................. 1,084,875
60,000 Oncor, Inc. .............................................. 270,000
13,700 Smithkline Beecham PLC.................................... 760,350
20,000 Somatogen, Inc. .......................................... 377,500
-----------
3,960,350
-----------
HEALTH CARE--MEDICAL TECHNOLOGY--5.4%
23,500 Boston Scientific Corp. .................................. 1,151,500
20,000 Medtronic, Inc. .......................................... 1,117,500
21,000 Ventritex, Inc. .......................................... 364,875
-----------
2,633,875
-----------
HEALTH CARE SERVICES--3.6%
19,000 Columbia/HCA Health Care.................................. 964,250
26,800 Healthsouth Corp. ........................................ 780,550
-----------
1,744,800
-----------
HOME PRODUCTS--4.7%
16,000 Duracell International, Inc. ............................. 828,000
20,000 Gillette Co. ............................................. 1,042,500
5,000 Procter & Gamble Co. ..................................... 415,000
-----------
2,285,500
-----------
HOTELS & RESTAURANTS--2.7%
10,200 Boston Chicken, Inc. ..................................... 327,675
17,000 McDonalds Corp. .......................................... 767,125
14,900 Primadonna Resorts, Inc. ................................. 219,775
-----------
1,314,575
-----------
INSURANCE--3.9%
14,000 American International Group, Inc. ....................... 1,295,000
10,000 Exel Limited.............................................. 610,000
-----------
1,905,000
-----------
MEDIA & EQUIPMENT--3.1%
13,500 Walt Disney Co. .......................................... 796,500
15,000 Viacom, Inc. ............................................. 710,625
-----------
1,507,125
-----------
NATURAL GAS--PIPELINES--1.6%
19,900 Enron Corp. .............................................. 758,688
-----------
OFFICE EQUIPMENT--6.7%
10,300 Cisco Systems, Inc. ...................................... 768,638
14,000 Hewlett Packard Co. ...................................... 1,172,500
11,000 Parametric Technology Corp. .............................. 731,500
22,500 Silicon Graphics, Inc.(c)................................. 618,750
-----------
3,291,388
-----------
OIL--INDEPENDENT PRODUCERS--3.3%
22,500 Anadarko Petroleum Corp................................... 1,217,812
12,000 Philips Petroleum Co...................................... 409,500
-----------
1,627,312
-----------
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES AVANTI GROWTH SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED) SHORT-TERM INVESTMENTS--5.1%
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
PHOTOGRAPHY--2.5%
18,000 Eastman Kodak Co. ........................................ $ 1,206,000
-----------
RETAIL--4.0%
40,500 Office Depot, Inc......................................... 799,875
22,500 Office Max, Inc........................................... 503,437
21,750 Petsmart, Inc............................................. 674,250
-----------
1,977,562
-----------
TELECOMMUNICATIONS--3.9%
5,000 Glenayre Technologies, Inc. .............................. 311,250
22,000 Qualcomm, Inc. ........................................... 946,000
18,000 Tellabs, Inc.(c).......................................... 666,000
-----------
1,923,250
-----------
TOBACCO--2.2%
12,000 Philip Morris Companies, Inc. ............................ 1,086,000
-----------
Total Common Stocks
(Identified Cost $38,942,941)............................ 46,272,919
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$2,481,000 Repurchase agreement with State Street Bank & Trust
Company dated 12/29/95 at 5.00% to be repurchased
at $2,484,378 on 1/2/96 and collateralized by
$2,350,000 U.S. Treasury Note 7.125% with a value
of $2,533,203...................................... $ 2,481,000
-----------
Total Short-Term Investments
(Identified Cost $2,481,000)....................... 2,481,000
-----------
Total Investments--99.8%
(Identified Cost $41,423,941)(b)................... 48,753,919
Receivables......................................... 169,962
Liabilities......................................... (91,511)
-----------
TOTAL NET ASSETS--100%.............................. $48,832,370
===========
(a) See Note 1A.
(b) Federal Tax Information:
At December 31, 1995 the net unrealized appreciation on investments based on
cost for federal income tax purposes of $41,423,941 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost...................................... $ 8,868,515
Aggregate gross unrealized appreciation for all
investments in which there is an excess of tax cost
over value......................................... (1,538,537)
-----------
Net unrealized appreciation......................... $ 7,329,978
===========
</TABLE>
(c) Non-income producing security.
See accompanying notes to financial statements.
26
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES AVANTI GROWTH SERIES)
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value........................................... $48,753,919
Receivable for:
Fund shares sold............................................... 116,599
Dividends and interest......................................... 53,316
Foreign taxes.................................................. 47
-----------
48,923,881
LIABILITIES
Payable for:
Fund shares redeemed.................................. $23,146
Withholding taxes..................................... 141
Due to custodian bank................................. 173
Accrued expenses:
Management fees....................................... 20,024
Deferred trustees' fees............................... 11,551
Other expenses........................................ 36,476
-------
91,511
-----------
$48,832,370
===========
NET ASSETS
Net Assets consist of:
Capital paid in................................................ $40,587,121
Undistributed net investment income............................ 6,362
Accumulated net realized gains................................. 908,909
Unrealized appreciation on investments......................... 7,329,978
-----------
NET ASSETS...................................................... $48,832,370
===========
Computation of offering price:
Net asset value and redemption price per share ($48,832,370
divided by 342,823 shares of beneficial interest).............. $ 142.44
===========
Identified cost of investments.................................. $41,423,941
===========
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 337,093(a)
Interest.............................................. 118,109
----------
455,202
EXPENSES
Management fees....................................... $260,886
Trustees' fees and expenses........................... 15,250
Custodian............................................. 64,836
Audit and tax services................................ 11,400
Legal................................................. 10,325
Printing.............................................. 26,351
Registration.......................................... 7
Miscellaneous......................................... 5,263
--------
Total expenses....................................... 394,318
Less expenses assumed by the investment adviser...... (77,529) 316,789
-------- ----------
NET INVESTMENT INCOME.................................. 138,413
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments--net..................... 2,703,726
----------
Unrealized appreciation on investments--net........... 6,182,432
----------
Net gain on investment transactions.................... 8,886,158
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $9,024,571
==========
</TABLE>
(a) Net of foreign taxes of: $141
See accompanying notes to financial statements.
27
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES AVANTI GROWTH SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 133,225 $ 138,413
Net realized gain (loss) on investments........... (429,848) 2,703,726
Unrealized appreciation on investments............ 522,519 6,182,432
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS............ 225,896 9,024,571
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (133,225) (132,051)
In excess of net investment income................ (1,266) 0
Net realized gain on investments.................. 0 (1,364,969)
------------ ------------
(134,491) (1,497,020)
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 24,276,118 25,328,373
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 134,491 132,051
Distributions from net realized gain.............. 0 1,364,969
------------ ------------
24,410,609 26,825,393
Cost of shares redeemed........................... (10,852,176) (11,142,834)
------------ ------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS..................................... 13,558,433 15,682,559
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 13,649,838 23,210,110
NET ASSETS
Beginning of the year............................. 11,972,422 25,622,260
------------ ------------
End of the year................................... $ 25,622,260 $ 48,832,370
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year............................. $ 0 $ 0
============ ============
End of the year................................... $ 0 $ 6,362
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 219,339 188,223
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 1,197 929
Distributions from net realized gain.............. 0 9,604
------------ ------------
220,536 198,756
Redeemed.......................................... (98,649) (83,183)
------------ ------------
Net change........................................ 121,887 115,573
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
APRIL 30, 1993*
THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1994 1995
--------------- ------------ ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year... $100.00 $113.67 $112.77
------- ------- -------
Income From Investment Operations
Net Investment Income............... 0.18 0.59 0.42
Net Realized and Unrealized Gain
(Loss) on Investments.............. 14.56 (0.89) 33.80
------- ------- -------
Total From Investment Operations.... 14.74 (0.30) 34.22
------- ------- -------
Less Distributions
Distributions From Net Investment
Income............................. (0.18) (0.60) (0.40)
Distributions From Net Realized Cap-
ital Gains......................... (0.67) 0.00 (4.15)
Distributions From Paid-in Capital.. (0.22) 0.00 0.00
------- ------- -------
Total Distributions................. (1.07) (0.60) (4.55)
------- ------- -------
Net Asset Value, End of Year......... $113.67 $112.77 $142.44
======= ======= =======
TOTAL RETURN (%)..................... 14.74*** (0.27) 30.35
Ratio of Operating Expenses to Aver-
age Net Assets (%).................. 0.85** 0.84 0.85
Ratio of Net Investment Income to Av-
erage Net Assets (%)................ 0.46** 0.67 0.37
Portfolio Turnover Rate (%).......... 21** 67 58
Net Assets, End of Year (000)........ $11,972 $25,622 $48,832
The ratios of expenses to average net
assets without giving effect to the
voluntary expense limitations
described in Note 4 to the Financial
Statements would have been (%)...... 0.89** 0.84 1.06
</TABLE>
* Commencement of operations.
** Computed on an annualized basis.
*** Not computed on an annualized basis.
See accompanying notes to financial statements.
28
<PAGE>
NEW ENGLAND ZENITH FUND
(VENTURE VALUE SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--88.4% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
BANKS AND SAVINGS & LOANS--10.5%
17,800 Banc One Corp. .......................................... $ 671,950
5,300 Barnett Banks, Inc. ..................................... 312,700
15,200 First Bank Systems, Inc. ................................ 754,300
300 First Union Corp. ....................................... 16,687
8,400 Golden West Financial Corp. ............................. 464,100
12,400 State Street Boston Corp. ............................... 558,000
4,200 Wells Fargo & Co. ....................................... 907,200
-----------
3,684,937
-----------
CHEMICALS--0.0%
100 Dow Chemical Co. ........................................ 7,037
-----------
COMPUTER PRODUCTS AND SERVICES--7.1%
7,100 Cirrus Logic, Inc.(c).................................... 140,225
9,800 Hewlett-Packard Co. ..................................... 820,750
15,200 Intel Corp. ............................................. 862,600
12,800 Texas Instruments, Inc. ................................. 662,400
-----------
2,485,975
-----------
CONSUMER PRODUCTS--8.1%
500 American Brands, Inc. ................................... 22,312
100 American Home Products Corp. ............................ 9,700
11,700 Coca-Cola Company........................................ 868,725
700 General Electric Co. .................................... 50,400
15,900 General Motors Corp. .................................... 840,712
400 Maytag Corp. ............................................ 8,100
7,200 Nestle SA (Switzerland) (ADR)(d)......................... 399,217
600 Philip Morris Cos., Inc. ................................ 54,300
6,100 The Gillette Co. ........................................ 317,963
8,000 The Seagram Co., Ltd. ................................... 277,000
-----------
2,848,429
-----------
ENERGY--4.5%
10,000 Amerada Hess Corp. ...................................... 530,000
200 Amoco Corp. ............................................. 14,375
300 Atlantic Richfield Co. .................................. 33,225
12,100 Burlington Resources, Inc. .............................. 474,925
900 Chevron Corp. ........................................... 47,250
6,200 Energy Venture, Inc.(c).................................. 156,550
1,400 Exxon Corp. ............................................. 112,175
100 Mobil Corp. ............................................. 11,200
2,600 Schlumberger, Ltd. ...................................... 180,050
200 Sonat, Inc. ............................................. 7,125
-----------
1,566,875
-----------
ENTERTAINMENT--0.7%
3,900 The Walt Disney Company.................................. 230,100
-----------
FINANCIAL SERVICES--11.4%
27,100 American Express Co. .................................... 1,121,262
2,800 Dean Witter, Discover & Co. ............................. 131,600
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
9,000 Donaldson Lufkin & Jenrette, Inc......................... $ 281,250
2,500 Federal Home Loan Mortgage Corporation................... 208,750
8,400 J.P. Morgan & Co., Inc. ................................. 674,100
10,200 Morgan Stanley Group, Inc. .............................. 822,375
15,700 SunAmerica, Inc. ........................................ 745,750
-----------
3,985,087
-----------
FOOD--2.7%
15,300 McDonalds Corp. ......................................... 690,413
9,600 Tyson Foods Inc. (Del.).................................. 250,800
-----------
941,213
-----------
INSURANCE--20.3%
19,181 Allstate Corp. .......................................... 788,819
4,300 Americal International Group, Inc. ...................... 397,750
9,000 Chubb Corp. ............................................. 870,750
36,700 Equitable Companies, Inc. ............................... 880,800
5,700 General Re Corp. ........................................ 883,500
9,600 NAC Re Corp. ............................................ 345,600
4,300 National Re Holdings Corp. .............................. 163,400
8,000 Progressive Corp. (Ohio)................................. 391,000
3,800 Transatlantic Holdings Inc. ............................. 278,825
60 Transport Holdings, Inc., Class A........................ 2,445
16,700 The Travelers Group, Inc. ............................... 1,050,013
15,200 20th Century Industries, Inc. ........................... 302,100
8,900 W.R. Berkley Corp. ...................................... 478,375
5,300 UNUM Corp. .............................................. 291,500
-----------
7,124,877
-----------
INTERNATIONAL--0.7%
17,700 Morgan Stanley Asia Pacific Fund, Inc. .................. 236,738
-----------
METALS AND MINERALS--0.3%
800 Alumax, Inc. ............................................ 24,500
1,200 Reynolds Metals Co. ..................................... 67,950
-----------
92,450
-----------
NEWSPAPER, TELEVISION AND RADIO--4.5%
10,900 Gannet Co., Inc.......................................... 668,987
31,300 News Corp. Ltd. (Australia) ADR(d)....................... 602,525
5,200 Tribune Co............................................... 317,850
-----------
1,589,362
-----------
PAPER--3.6%
18,900 Fort Howard Corp.(c)..................................... 425,250
200 International Paper Co................................... 7,575
12,500 Jefferson Smurfit Corp.(c)............................... 118,750
4,400 Mead Corp. .............................................. 229,900
10,400 Union Camp Corp. ........................................ 495,300
-----------
1,276,775
-----------
</TABLE>
See accompanying notes to financial statements.
30
<PAGE>
NEW ENGLAND ZENITH FUND
(VENTURE VALUE SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED) PREFERRED STOCKS--2.3%
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
PHARMACEUTICAL AND HEALTH CARE--3.2%
100 Bristol-Myers Squibb Co. ............................. $ 8,588
3,300 Johnson & Johnson..................................... 282,562
2,300 Merck & Co., Inc. .................................... 151,225
10,700 Pfizer, Inc. ......................................... 674,100
-----------
1,116,475
-----------
PHOTOGRAPHIC--1.1%
5,600 Eastman Kodak Co. .................................... 375,200
-----------
REAL ESTATE--3.4%
5,500 Federal Realty Investment Trust....................... 125,125
37,700 Host Marriott Corp.(c)................................ 499,525
1,200 Kimco Realty Corp..................................... 32,700
3,200 Mid-Atlantic Realty Trust............................. 27,600
3,500 Saul Centers, Inc..................................... 47,688
6,000 United Dominion Realty Trust, Inc. ................... 90,000
8,600 Vornado Realty Trust.................................. 322,500
1,700 Weingarten Realty, Inc................ ............... 64,600
-----------
1,209,738
-----------
RETAIL--2.1%
15,100 Federated Department Stores, Inc.(c).................. 415,250
7,400 Harcourt General, Inc................................. 309,875
-----------
725,125
-----------
TELECOMMUNICATIONS--2.4%
12,700 Airtouch Communications(c)............................ 358,775
1,700 AT & T Corp........................................... 110,075
2,600 Cellular Communications, Inc.(c)...................... 129,350
8,800 MCI Communications Corp. ............................. 229,900
200 SBC Communications, Inc. ............................. 11,500
-----------
839,600
-----------
TIMBER PRODUCTS--0.6%
5,300 Weyerhaeuser Co. ..................................... 229,225
-----------
TRANSPORTATION--1.1%
4,600 Illinois Central Corp. ............................... 176,525
3,400 Union Pacific Corp. .................................. 224,400
-----------
400,925
-----------
UTILITIES--0.1%
100 Carolina Power & Light................................ 3,450
200 Duke Power Co. ....................................... 9,475
100 San Diego Gas & Electric Co. ......................... 2,375
200 SCEcorp. ............................................. 3,550
100 Wisconsin Energy Corp. ............................... 3,063
-----------
21,913
-----------
Total Common Stocks
(Identified Cost $27,202,197)........................ 30,988,056
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
900 Banc One Corp., $3.50,
Ser. C Conv. Pfd................................... $ 59,063
4,100 Citicorp, $5.375, Ser. 13 Conv. Pfd................. 752,862
-----------
Total Preferred Stocks
(Identified Cost $654,977)......................... 811,925
-----------
SHORT-TERM INVESTMENT--9.3%
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$3,255,000 Federal Home Loan Mortgage Association Discount
Note, 5.500%, 1/02/96.............................. 3,254,503
-----------
Total Short-Term Investment
(Identified Cost $3,254,503)....................... 3,254,503
-----------
Total Investments--100.0%
(Identified Cost $31,111,677)(b)................... 35,054,484
Cash and Receivables................................ 186,716
Liabilities......................................... (196,233)
-----------
TOTAL NET ASSETS--100%.............................. $35,044,967
===========
(a) See Note 1A.
(b) Federal Tax Information:
At December 31, 1995 the net unrealized appreciation on investments based on
cost of $31,114,217 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost...................................... $ 4,206,324
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value......................................... (266,057)
-----------
Net unrealized appreciation......................... $ 3,940,267
===========
</TABLE>
(c) Non-income producing security.
(d) An American Depository Receipt (ADR) is a certificate issued by U.S. bank
representing the right to receive securities of the foreign issuer
described. The values of ADRs are significantly influenced by trading on
exchanges not not located in the United States or Canada.
See accompanying notes to financial statements.
31
<PAGE>
NEW ENGLAND ZENITH FUND
(VENTURE VALUE SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value..................................... $35,054,484
Cash..................................................... 6,174
Receivable for:
Fund shares sold......................................... 116,545
Dividends and interest................................... 54,906
Foreign taxes............................................ 137
Due from advisor......................................... 1,249
Unamortized organization expense......................... 7,705
-----------
35,241,200
LIABILITIES
Payable for:
Securities purchased..................................... $142,266
Fund shares redeemed..................................... 7,525
Dividends declared....................................... 178
Accrued expenses:
Management fees.......................................... 12,762
Other expenses........................................... 33,502
--------
196,233
-----------
$35,044,967
===========
NET ASSETS
Net Assets consist of:
Capital paid in.......................................... $31,014,881
Undistributed net investment income...................... 3,911
Accumulated net realized gains........................... 83,368
Unrealized appreciation on investments................... 3,942,807
-----------
NET ASSETS................................................ $35,044,967
===========
Computation of offering price:
Net asset value and redemption price per share
($35,044,967 divided by 2,674,422 shares of beneficial
interest)................................................ $ 13.10
===========
Identified cost of investments............................ $31,111,677
===========
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................. $ 300,211(a)
Interest.............................................. 104,200
----------
404,411
EXPENSES
Management fees....................................... $131,969
Trustees' fees and expenses........................... 15,050
Custodian............................................. 79,272
Audit and tax services................................ 19,800
Legal................................................. 10,821
Printing.............................................. 5,529
Registration.......................................... 7
Insurance............................................. 166
Amortization of organization expense.................. 2,347
Miscellaneous......................................... 2,372
--------
Total expenses....................................... 267,333
Less expenses assumed by the investment adviser...... (108,971) 158,362
-------- ----------
NET INVESTMENT INCOME.................................. 246,049
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on Investments--net..................... 600,646
Unrealized appreciation on Investments--net........... 3,966,150
----------
Net gain on investment transactions.................... 4,566,796
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $4,812,845
==========
</TABLE>
(a) Net of foreign taxes of: $1,574
See accompanying notes to financial statements.
32
<PAGE>
NEW ENGLAND ZENITH FUND
(VENTURE VALUE SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 31, 1994 (A)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
-------------------- ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income...................... $ 8,452 $ 246,049
Net realized gain on investments........... 0 600,646
Unrealized appreciation (depreciation) on
investments............................... (23,343) 3,966,150
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM OP-
ERATIONS.................................. (14,891) 4,812,845
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income...................... (8,452) (244,485)
In excess of net investment income......... (1,456) 0
Net realized gain on investments........... 0 (517,278)
----------- -----------
(9,908) (761,763)
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares............... 3,821,298 31,372,928
Net asset value of shares issued in connec-
tion with the reinvestment of:
Distributions from net investment income... 9,908 244,485
Distributions from net realized gain....... 0 517,278
----------- -----------
3,831,206 32,134,691
Cost of shares redeemed.................... (1,434,963) (4,512,250)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS........................ 2,396,243 27,622,441
----------- -----------
TOTAL INCREASE IN NET ASSETS............... 2,371,444 31,673,523
NET ASSETS
Beginning of the year...................... 1,000,000 3,371,444
----------- -----------
End of the year............................ $ 3,371,444 $35,044,967
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year...................... $ 0 $ 0
=========== ===========
End of the year............................ $ 0 $ 3,911
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares............. 397,102 2,627,688
Issued in connection with the reinvestment
of:
Distributions from net investment income... 1,030 18,850
Distributions from net realized gain....... 0 39,883
----------- -----------
398,132 2,686,421
Redeemed................................... (147,540) (362,591)
----------- -----------
Net change................................. 250,592 2,323,830
=========== ===========
(a) Commencement of Operations
FINANCIAL HIGHLIGHTS
<CAPTION>
OCTOBER 31, 1994*
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
-------------------- ------------
<S> <C> <C>
Net Asset Value, Beginning of Year.......... $ 10.00 $ 9.62
----------- -----------
Income From Investment Operations
Net Investment Income...................... 0.03 0.10
Net Realized and Unrealized Gain (Loss) on
Investments............................... (0.38) 3.68
----------- -----------
Total From Investment Operations........... (0.35) 3.78
----------- -----------
Less Distributions
Distributions From Net Investment Income... (0.03) (0.10)
Distributions From Net Realized Capital
Gains..................................... 0.00 (0.20)
----------- -----------
Total Distributions........................ (0.03) (0.30)
----------- -----------
Net Asset Value, End of Year................ $ 9.62 $ 13.10
=========== ===========
TOTAL RETURN (%)............................ (3.50)*** 39.28
Ratio of Operating Expenses to Average Net
Assets (%)................................. 0.90 ** 0.90
Ratio of Net Investment Income to Average
Net Assets (%)............................. 2.54 ** 1.39
Portfolio Turnover Rate (%)................. 1 ** 20
Net Assets, End of Year (000)............... $ 3,371 $ 35,045
The ratios of expenses to average net assets
without giving effect to the voluntary
expense limitations described in Note 4 to
the Financial Statements would have been
(%)........................................ 3.97 ** 1.51
</TABLE>
* Commencement of operations.
** Computed on an annualized basis.
*** Not computed on an annualized basis.
See accompanying notes to financial statements.
33
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK VALUE GROWTH SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--95.5% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--2.2%
6,200 Lockheed Martin Corp. ................................... $ 489,800
6,200 McDonnell Douglas Corp. ................................. 570,400
-----------
1,060,200
-----------
AGRICULTURE & FOOD--4.7%
4,600 CPC International, Inc. ................................. 315,675
13,900 IBP, Inc. ............................................... 701,950
17,000 Pioneer Hi Bred, Inc. ................................... 945,625
2,200 Unilever NV.............................................. 309,650
-----------
2,272,900
-----------
AIRLINES--1.4%
6,900 AMR Corp. (c)............................................ 512,325
2,800 Northwest Airlines Corp. ................................ 142,800
-----------
655,125
-----------
ALUMINUM--1.7%
15,600 Aluminium Company of America............................. 824,850
-----------
APPAREL--1.1%
7,600 Nike, Inc. .............................................. 529,150
-----------
BANKS--5.7%
5,900 Bank of Boston Corp. .................................... 272,875
17,000 Bank of New York, Inc. .................................. 828,750
7,000 Citicorp................................................. 470,750
9,100 NationsBank Corp. ....................................... 633,588
1,300 Suntrust Banks, Inc. .................................... 89,050
8,000 Union Bank of San Francisco.............................. 434,000
-----------
2,729,013
-----------
BEVERAGE--2.6%
17,000 Coca Cola Co. ........................................... 1,262,250
-----------
BUSINESS MACHINES--2.8%
8,200 Dell Computer Corp. ..................................... 283,925
7,600 Hewlett Packard Co. ..................................... 636,500
7,400 Seagate Technology....................................... 351,500
1,400 Sun Microsystems, Inc. (c)............................... 63,875
-----------
1,335,800
-----------
CHEMICALS--1.6%
14,400 Cabot Corp. ............................................. 775,800
-----------
COSMETICS--3.4%
16,700 Johnson & Johnson........................................ 1,429,939
2,700 Procter & Gamble Co. .................................... 224,100
-----------
1,654,039
-----------
DRUGS--6.3%
6,200 Amgen, Inc. (c).......................................... 368,125
8,800 Lilly & Eli and Co. ..................................... 495,000
27,600 Merck & Company, Inc. ................................... 1,814,700
6,500 Schering Plough Corp. ................................... 355,875
-----------
3,033,700
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
ELECTRIC UTILITIES--5.3%
3,500 Central and Southwest Corp. .............................. $ 97,563
15,200 Consolidated Edison Co. of New York....................... 486,400
13,000 Houston Industries, Inc. ................................. 315,250
32,400 Pacific Gas and Electric Co. ............................. 919,350
5,800 Southern Co. ............................................. 142,825
18,400 Unicom Corp. ............................................. 602,600
-----------
2,563,988
-----------
ELECTRONICS--2.4%
5,800 Intel Corp. .............................................. 329,150
11,800 Raytheon Co. ............................................. 557,550
900 U.S. Robotics Corp. ...................................... 78,975
6,510 Vishay Intertechnology, Inc. ............................. 205,065
-----------
1,170,740
-----------
FINANCIAL-SERVICES--3.1%
6,500 Beneficial Corp. ......................................... 303,062
2,700 Household International, Inc. ............................ 159,637
3,000 Merrill Lynch & Co. ...................................... 153,000
5,700 Student Loan Marketing Association........................ 375,488
7,900 Travelers Group, Inc. .................................... 496,712
-----------
1,487,899
-----------
GAS UTILITIES--1.6%
19,900 Oneok..................................................... 455,213
10,900 Pacific Enterprises....................................... 307,925
-----------
763,138
-----------
GOLD--0.1%
1,400 Newmont Gold Co. ......................................... 61,250
-----------
HEALTHCARE--4.5%
19,700 Abbott Labs............................................... 822,475
6,600 Boston Scientific Group................................... 323,400
18,000 Medtronic, Inc. .......................................... 1,005,750
-----------
2,151,625
-----------
HOTEL & RESTAURANT--0.3%
3,000 McDonalds Corp. .......................................... 135,375
-----------
INSURANCE--LIFE--0.3%
3,900 Protective Life Corp. .................................... 121,875
-----------
INSURANCE--OTHER--5.5%
12,000 American International Group, Inc. ....................... 1,110,000
3,300 Cigna Corp. .............................................. 340,725
700 General Realty Corp. ..................................... 108,500
13,000 Loews Corp. .............................................. 1,018,875
900 MGIC Investment Corp. .................................... 48,825
-----------
2,626,925
-----------
INTERNATIONAL OIL--5.2%
3,600 Chevron Corp. ............................................ 189,000
17,600 Exxon Corp. .............................................. 1,410,200
8,100 Mobil Corp. .............................................. 907,200
-----------
2,506,400
-----------
</TABLE>
See accompanying notes to financial statements.
36
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK VALUE GROWTH SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
MEDIA--2.1%
22,500 Clear Channel Communications.............................. $ 992,812
-----------
MORTGAGE--0.5%
500 Federal Home Loan Mortgage Corp. ......................... 41,750
7,200 Green Tree Financial Corp. ............................... 189,900
-----------
231,650
-----------
MOTOR VEHICLES--1.1%
19,000 Ford Motor Co. ........................................... 551,000
-----------
OIL REFINEMENT/DISTRIBUTION--5.0%
14,600 Amoco Corp. .............................................. 1,049,375
9,600 Royal Dutch Petroleum Co. ................................ 1,354,800
-----------
2,404,175
-----------
OIL SERVICE--0.3%
2,800 Halliburton Co. .......................................... 141,750
-----------
PAPER--0.9%
8,900 Champion International Corp. ............................. 373,800
800 Consolidated Papers....................................... 44,900
-----------
418,700
-----------
PHOTOGRAPHY--0.8%
6,100 Eastman Kodak............................................. 408,700
-----------
PRODUCER OF GOODS--2.4%
4,400 Applied Materials, Inc.(c)................................ 173,250
1,900 Danaher Corp. ............................................ 60,325
2,600 Dover Corp. .............................................. 95,875
7,300 Harsco Corp. ............................................. 424,312
5,200 Illinois Tool Works, Inc. ................................ 306,800
2,800 Parker-Hannifin Corp. .................................... 95,900
-----------
1,156,462
-----------
PUBLISHING--0.3%
3,700 Reynolds & Reynolds....................................... 143,837
-----------
RAILROAD--2.8%
8,900 Burlington Northern, Inc. ................................ 694,200
14,400 CSX Corp. ................................................ 657,000
-----------
1,351,200
-----------
RETAIL--3.4%
4,800 Barnes & Noble, Inc. ..................................... 139,200
8,100 Eckerd Jack Corp. Del..................................... 361,462
2,100 Micro Warehouse, Inc. .................................... 90,825
26,700 Sears Roebuck and Co. .................................... 1,041,300
-----------
1,632,787
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
SOAPS--1.0%
9,900 Premark International, Inc. ........................ $ 501,188
-----------
TELEPHONE--11.6%
22,000 Ameritech Corp. .................................... 1,298,000
5,600 Bell Atlantic Corp. ................................ 374,500
32,600 Bell South Corp. ................................... 1,418,100
27,500 Cincinnati Bell, Inc. .............................. 955,625
20,500 SBC Communications, Inc. ........................... 1,178,750
9,600 Sprint Corp. ....................................... 382,800
-----------
5,607,775
-----------
THRIFT--0.6%
7,200 Standard Federal Bancorporation..................... 283,500
-----------
TOBACCO--0.9%
4,800 Phillip Morris Companies, Inc. ..................... 434,400
-----------
Total Common Stocks
(Identified Cost $38,331,094)...................... 45,981,978
-----------
SHORT-TERM INVESTMENTS--4.8%
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$2,304,000 Repurchase agreement with State Street Bank & Trust
Company dated 12/29/95 at 5% to be repurchased at
$2,305,280 on 1/2/96. Collaterized by $2,015,000
U.S. Treasury Notes 8.75% due 8/15/00 with a value
of $2,352,498...................................... 2,304,000
-----------
Total Short-Term Investments
(Identified Cost $2,304,000)....................... 2,304,000
-----------
Total Investments--100.3%
(Identified Cost $40,635,094)(b)................... 48,285,978
Cash and Receivables................................ 173,840
Liabilities......................................... (330,781)
-----------
TOTAL NET ASSETS--100%.............................. $48,129,037
===========
(a) See Note 1A.
(b) Federal Tax Information:
At December 31, 1995 the net unrealized appreciation on investments based on
cost of $40,635,910 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost...................................... $ 7,954,474
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value......................................... (304,406)
-----------
Net unrealized appreciation......................... $ 7,650,068
===========
</TABLE>
(c) Non-income producing security.
(d) An American Depository Receipt (ADR) is a certificate issued by a U.S.
Bank representing the right to receive securities of the foreign issuer
described. The values of ADR's are significantly influenced by trading on
exchanges not located in the United States or Canada.
See accompanying notes to financial statements.
37
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK VALUE GROWTH SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value..................................... $48,285,978
Cash..................................................... 751
Receivable for:
Fund shares sold......................................... 80,096
Dividends and interest................................... 92,993
-----------
48,459,818
LIABILITIES
Payable for:
Securities purchased..................................... $258,121
Fund shares redeemed..................................... 11,565
Accrued expenses:
Management fees.......................................... 19,720
Deferred trustees' fees.................................. 655
Other expenses........................................... 40,720
--------
330,781
-----------
$48,129,037
===========
NET ASSETS
Net Assets consist of:
Capital paid in.......................................... $39,982,393
Undistributed net investment income...................... 13,865
Accumulated net realized gains........................... 481,895
Unrealized appreciation on investments................... 7,650,884
-----------
NET ASSETS................................................ $48,129,037
===========
Computation of offering price:
Net asset value and redemption price per share
($48,129,037 divided by 340,603 shares of beneficial
interest)................................................ $ 141.31
===========
Identified cost of investments............................ $40,635,094
===========
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................ $ 764,562(a)
Interest............................................. 93,774
-----------
858,336
EXPENSES
Management fees...................................... $242,628
Trustees' fees and expenses.......................... 15,270
Custodian............................................ 59,894
Audit and tax services............................... 11,400
Legal................................................ 10,326
Printing............................................. 23,326
Registration......................................... 7
Miscellaneous........................................ 5,506
--------
Total expenses...................................... 368,357
Less expenses assumed by the investment adviser..... (73,738) 294,619
-------- -----------
NET INVESTMENT INCOME................................. 563,717
REALIZED AND UNREALIZED GAIN ON INVESTMENTS,
Realized gain on investments--net.................... 2,941,365
Unrealized appreciation on investments--net.......... 6,907,865
-----------
Net gain on investment transactions................... 9,849,230
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............ $10,412,947
===========
</TABLE>
(a) Net of foreign taxes of $4,644
See accompanying notes to financial statements.
38
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK VALUE GROWTH SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income.............................. $ 387,990 $ 563,717
Net realized gain (loss) on investments............ (633,620) 2,941,365
Unrealized appreciation on investments............. 298,917 6,907,865
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS............. 53,287 10,412,947
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.............................. (387,990) (549,852)
Paid in capital.................................... (9,110) 0
Net realized gain on investments................... 0 (1,825,459)
----------- -----------
(397,100) (2,375,311)
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares....................... 23,191,269 22,945,280
Net asset value of shares issued in connection with
the reinvestment of:
Distributions from net investment income........... 387,990 549,852
Distributions from paid in capital................. 9,110
Distributions from net realized gain............... 0 1,825,459
----------- -----------
23,588,369 25,320,591
Cost of shares redeemed............................ (9,392,660) (8,163,352)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS...................................... 14,195,709 17,157,239
----------- -----------
TOTAL INCREASE IN NET ASSETS....................... 13,851,696 25,194,875
NET ASSETS
Beginning of the year.............................. 9,082,266 22,934,162
----------- -----------
End of the year.................................... $22,934,162 $48,129,037
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year.............................. $ (315) $ 0
=========== ===========
End of the year.................................... $ 0 $ 13,865
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares..................... 212,075 175,593
Issued in connection with the reinvestment of:
Distributions from net investment income........... 3,558 3,932
Distributions from paid in capital................. 73 0
Distributions from net realized gain............... 0 13,054
----------- -----------
215,706 192,579
Redeemed........................................... (88,227) (62,314)
----------- -----------
Net change......................................... 129,479 130,265
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
APRIL 30, 1993*
THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1994 1995
--------------- ------------ ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year... $100.00 $112.32 $109.03
------- ------- -------
Income From Investment Operations
Net Investment Income............... 0.92 1.90 1.77
Net Realized and Unrealized Gain
(Loss) on Investments.............. 13.33 (3.25) 37.91
------- ------- -------
Total From Investment Operations.... 14.25 (1.35) 39.68
------- ------- -------
Less Distributions
Distributions From Net Investment
Income............................. (0.92) (1.92) (1.71)
Distributions From Net Realized Cap-
ital Gains......................... (1.00) 0.00 (5.69)
Distributions In Excess of Net Real-
ized Capital Gains................. (0.01) 0.00 0.00
Distributions From Paid-in Capital.. 0.00 (0.02) 0.00
------- ------- -------
Total Distributions................. (1.93) (1.94) (7.40)
------- ------- -------
Net Asset Value, End of Year......... $112.32 $109.03 $141.31
======= ======= =======
TOTAL RETURN (%)..................... 14.24*** (1.21) 36.46
Ratio of Operating Expenses to Aver-
age Net Assets (%).................. 0.85** 0.85 0.85
Ratio of Net Investment Income to Av-
erage Net Assets (%)................ 2.16** 2.30 1.63
Portfolio Turnover Rate (%).......... 49** 133 92
Net Assets, End of Year (000)........ $ 9,082 $22,934 $48,129
The ratios of expenses to average net
assets without giving effect to the
voluntary expense limitations
described in Note 4 to the Financial
Statements would have been (%)...... 0.94** 0.86 1.06
</TABLE>
* Commencement of operations.
** Computed on an annualized basis.
*** Not computed on an annualized basis.
See accompanying notes to financial statements.
39
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--99.1% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--2.2%
3,100 Allied Signal, Inc. ..................................... $ 147,250
4,500 Boeing Co. .............................................. 352,687
900 General Dynamics Corp. .................................. 53,213
2,815 Lockheed Martin Corp. ................................... 222,385
1,500 McDonnell Douglas Corp. ................................. 138,000
400 Northrop Grumman Corp. .................................. 25,600
2,300 Rockwell International Corp. ............................ 121,612
900 Teledyne, Inc. .......................................... 23,062
1,300 United Technologies Corp. ............................... 123,337
-----------
1,207,146
-----------
AGRICULTURE AND FOOD--3.1%
6,596 Archer-Daniels-Midland Co. .............................. 118,728
3,300 Campbell Soup Company.................................... 198,000
3,050 Conagra, Inc. ........................................... 125,812
1,600 CPC International, Inc. ................................. 109,800
2,200 General Mills, Inc. ..................................... 127,050
4,800 H.J. Heinz Co. .......................................... 159,000
700 Hershey Foods Corp. ..................................... 45,500
3,400 Kellogg Co. ............................................. 262,650
800 Pioneer Hi Bred International, Inc. ..................... 44,500
1,600 Quaker Oats Co. ......................................... 55,200
6,000 Sara Lee Corp. .......................................... 191,250
2,200 Unilever N.V. ........................................... 309,650
1,300 William Wrigley Jr. Co. ................................. 68,250
-----------
1,815,390
-----------
AIR TRANSPORT--0.4%
900 AMR Corp.(c)............................................. 66,825
900 Delta Airlines, Inc. .................................... 66,487
700 Federal Express Corp.(c)................................. 51,712
1,600 Southwest Airlines Co. .................................. 37,200
400 US Air Group, Inc.(c).................................... 5,300
-----------
227,524
-----------
ALUMINUM--0.4%
2,400 Alcan Aluminum, Ltd. .................................... 74,700
2,000 Aluminum Company of America.............................. 105,750
900 Reynolds Metals Co. ..................................... 50,962
-----------
231,412
-----------
APPAREL--0.5%
100 Brown Group, Inc. ....................................... 1,425
600 Liz Claiborne, Inc. ..................................... 16,650
2,400 Nike, Inc. .............................................. 167,100
1,200 Reebok International Ltd. ............................... 33,900
300 Russell Corp. ........................................... 8,325
100 Springs Industries, Inc. ................................ 4,137
400 Stride Rite Corp. ....................................... 3,000
1,000 VF Corp. ................................................ 52,750
-----------
287,287
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
BANKS--6.5%
4,978 Banc One Corp. .......................................... $ 187,920
2,200 Bank of New York, Inc. .................................. 107,250
1,800 Bank of Boston Corp. .................................... 83,250
4,928 BankAmerica Corp. ....................................... 319,088
900 Bankers Trust New York Corp. ............................ 59,850
1,100 Barnett Banks of Florida, Inc. .......................... 64,900
1,500 Boatmens Bancshares, Inc. ............................... 61,312
2,200 Chase Manhattan Corp. ................................... 133,375
3,282 Chemical Banking Corp. .................................. 192,817
5,200 Citicorp(c).............................................. 349,700
1,500 Comerica, Inc. .......................................... 60,187
1,700 Core States Financial Corp. ............................. 64,388
1,700 First Bank Systems, Inc. ................................ 84,362
3,510 First Chicago Corp. ..................................... 138,645
1,000 First Fidelity Bancorporation............................ 75,375
1,100 First Interstate Bancorp................................. 150,150
2,100 First U.N. Corp. ........................................ 116,812
4,462 Fleet Financial Group, Inc. ............................. 181,827
2,400 J.P. Morgan & Co., Inc. ................................. 192,600
3,100 Keycorp.................................................. 112,375
1,750 Mellon Bank Corp. ....................................... 94,062
1,800 National City Corp. ..................................... 59,625
3,816 Nationsbank Corp. ....................................... 265,689
3,700 Norwest Corp. ........................................... 122,100
4,400 PNC Bank Corp. .......................................... 141,900
700 Republic New York Corp. ................................. 43,487
1,100 Suntrust Banks, Inc. .................................... 75,350
1,900 U.S. Bancorp............................................. 63,887
1,900 Wachovia Corp. .......................................... 86,925
600 Wells Fargo & Co. ....................................... 129,600
-----------
3,818,808
-----------
BEVERAGES--3.1%
16,100 Coca Cola Co. ........................................... 1,195,425
10,100 PepsiCo, Inc. ........................................... 564,337
1,300 Whitman Corp. ........................................... 30,225
-----------
1,789,987
-----------
BUSINESS MACHINES--4.0%
1,400 Amdahl Corporation(c).................................... 11,900
1,400 Apple Computer, Inc. .................................... 44,625
1,000 Cabletron Systems, Inc.(c)............................... 81,000
3,600 Cisco Systems, Inc. ..................................... 268,650
3,300 Compaq Computer Corp.(c)................................. 158,400
300 Cray Research, Inc.(c)................................... 7,425
300 Data General Corp.(c).................................... 4,125
1,800 Digital Equipment Corp.(c)............................... 115,425
6,300 Hewlett-Packard Co. ..................................... 527,625
7,300 International Business Machines Corp. ................... 669,775
1,700 Pitney Bowes, Inc. ...................................... 79,900
2,200 Silicon Graphics, Inc.(c)................................ 60,500
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
BUSINESS MACHINES--(CONTINUED)
2,300 Sun Microsystems, Inc.(c)................................ $ 104,938
1,800 Tandem Computers, Inc.(c)................................ 19,125
2,200 Unisystems, Corp.(c)..................................... 12,375
1,500 Xerox Corp. ............................................. 205,500
-----------
2,371,288
-----------
CHEMICALS--3.1%
1,000 Air Products and Chemicals, Inc. ........................ 52,750
900 Avery Dennison Corp. .................................... 45,113
300 B.F. Goodrich Co. ....................................... 20,437
3,050 Dow Chemical Co. ........................................ 214,644
1,300 Eastman Chemical Co. .................................... 81,413
7,000 E.I. Du Pont de Nemours & Co. ........................... 489,125
300 FMC Corp.(c)............................................. 20,288
800 Great Lakes Chemical Corp. .............................. 57,600
1,400 Hercules, Inc. .......................................... 78,925
1,300 Monsanto Company......................................... 159,250
2,100 Morton International, Inc. .............................. 75,337
1,000 Nalco Chemical Co. ...................................... 30,125
3,300 Occidental Petroleum Corp. .............................. 70,537
2,300 PPG Industries, Inc. .................................... 105,225
2,000 Praxair, Inc. ........................................... 67,250
1,000 Rohm & Haas Co. ......................................... 64,375
1,000 Sigma-Aldrich Corp. ..................................... 49,500
1,700 Union Carbide Corp. ..................................... 63,750
1,200 W.R. Grace & Co. ........................................ 70,950
-----------
1,816,594
-----------
CONSTRUCTION--0.3%
800 Armstrong World Industries, Inc. ........................ 49,600
700 Centex Corp. ............................................ 24,325
900 Fluor Corp. ............................................. 59,400
700 Sherwin Williams Co. .................................... 28,525
100 Skyline Corp. ........................................... 2,075
200 Zurn Industries, Inc. ................................... 4,275
-----------
168,200
-----------
CONSUMER DURABLES--0.3%
1,000 Black & Decker Corp. .................................... 35,250
2,000 Masco Corp. ............................................. 62,750
800 Maytag Corp. ............................................ 16,200
1,000 Whirlpool Corp. ......................................... 53,250
-----------
167,450
-----------
CONTAINERS--0.2%
200 Ball Corp. .............................................. 5,500
400 Bemis, Inc. ............................................. 10,250
1,300 Crown Cork & Seal, Inc.(c)............................... 54,275
900 Temple Inland, Inc. ..................................... 39,713
-----------
109,738
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
COSMETICS--2.6%
200 Alberto Culver Co. ...................................... $ 6,875
800 Avon Products, Inc. ..................................... 60,300
8,100 Johnson & Johnson........................................ 693,562
9,060 Procter & Gamble Co. .................................... 751,980
-----------
1,512,717
-----------
DOMESTIC OIL RESERVES--0.8%
2,000 Atlantic Richfield Co. .................................. 221,500
1,600 Burlington Resources, Inc. .............................. 62,800
700 Louisiana Land & Exploration............................. 30,013
800 Pennzoil Company......................................... 33,800
2,900 Phillips Petroleum Company............................... 98,962
1,711 Santa Fe Energy Research, Inc.(c)........................ 16,468
-----------
463,543
-----------
DRUGS & MEDICINE--6.2%
700 Allergan, Inc. .......................................... 22,750
1,600 Alza Corp.(c)............................................ 39,600
3,700 American Home Products Corp. ............................ 358,900
3,800 Amgen, Inc.(c)........................................... 225,625
6,140 Bristol Myers & Squibb Co. .............................. 527,273
7,200 Eli Lilly & Company...................................... 405,000
15,600 Merck & Co., Inc. ....................................... 1,025,700
8,000 Pfizer, Inc. ............................................ 504,000
6,680 Pharmacia & Upjohn, Inc. ................................ 258,850
4,600 Schering-Plough Corp. ................................... 251,850
-----------
3,619,548
-----------
ELECTRIC UTILITIES--3.7%
2,500 American Electric Power Co., Inc. ....................... 101,250
1,600 Baltimore Gas & Electric Co. ............................ 45,600
1,700 Carolina Power & Light Co. .............................. 58,650
2,500 Central & South West Corp. .............................. 69,688
2,111 Cinergy Corp. ........................................... 64,649
3,100 Consolidated Edison Co. of New York...................... 99,200
1,600 Detroit Edison Co. ...................................... 55,200
2,050 Dominion Resources, Inc. ................................ 84,562
2,800 Duke Power Co. .......................................... 132,650
3,200 Entergy Corp. ........................................... 93,600
2,300 FPL Group, Inc. ......................................... 106,663
1,500 General Public Utilities Corp. .......................... 51,000
4,000 Houston Industries, Inc. ................................ 97,000
2,000 Niagara Mohawk Power Corp. .............................. 19,250
500 Northern States Power Co. ............................... 24,563
2,100 Ohio Edison Co. ......................................... 49,350
5,600 Pacific Gas & Electric Corp. ............................ 158,900
3,500 Pacificorp............................................... 74,375
3,500 PECO Energy Co. ......................................... 105,437
2,000 P.P. & L Res, Inc. ...................................... 50,000
3,700 Public Service Enterprise Group.......................... 113,312
5,700 SCE Corp. ............................................... 101,175
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
ELECTRIC UTILITIES--(CONTINUED)
8,800 Southern Co. ............................................ $ 216,700
2,500 Texas Utilities Company.................................. 102,812
2,700 Unicom Corp. ............................................ 88,425
800 Union Electric Co. ...................................... 33,400
-----------
2,197,411
-----------
ELECTRONICS--3.6%
1,600 Advanced Micro Devices, Inc.(c).......................... 26,400
3,056 AMP, Inc. ............................................... 117,274
225 Andrew Corp.(c).......................................... 8,606
1,300 Cooper Industries, Inc. ................................. 47,775
1,800 DSC Communications Corp.(c).............................. 66,375
300 Harris Corp. ............................................ 16,388
1,400 Honeywell, Inc. ......................................... 68,075
10,700 Intel Corp. ............................................. 607,225
1,800 Loral Corp. ............................................. 63,675
1,500 LSI Logic Corp.(c)....................................... 49,125
3,400 Micron Technology, Inc. ................................. 134,725
7,300 Motorola, Inc. .......................................... 416,100
1,800 National Semiconductor Corp.(c).......................... 40,050
3,100 Northern Telecom, Ltd. .................................. 133,300
300 Raychem Corp. ........................................... 17,063
2,600 Raytheon Co. ............................................ 122,850
1,100 Scientific Atlanta, Inc. ................................ 16,500
200 Tektronix, Inc. ......................................... 9,825
1,100 Tellabs, Inc.(c)......................................... 40,700
2,500 Texas Instruments, Inc. ................................. 129,375
100 Thomas & Betts Corp. .................................... 7,375
-----------
2,138,781
-----------
FINANCE--1.8%
6,400 American Express Co. .................................... 264,800
400 Beneficial Corp. ........................................ 18,650
2,402 Dean Witter Discover & Co. .............................. 112,894
1,200 Household International, Inc. ........................... 70,950
1,550 MBNA Corp. .............................................. 57,156
2,300 Merrill Lynch & Co., Inc. ............................... 117,300
1,000 Morgan Stanley Group, Inc. .............................. 80,625
1,200 Salomon, Inc. ........................................... 42,600
4,384 Travelers Group, Inc. ................................... 275,644
-----------
1,040,619
-----------
FOREIGN OIL RESERVES--0.1%
900 Kerr McGee Corp. ........................................ 57,150
-----------
FOREST PRODUCTS--0.1%
1,300 Louisiana Pacific Corp. ................................. 31,525
-----------
GAS UTILITIES--1.0%
900 Columbia Gas System, Inc.(c)............................. 39,488
1,100 Consolidated Natural Gas Co. ............................ 49,913
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
700 Eastern Enterprises...................................... $ 24,675
3,200 Enron Corp. ............................................. 122,000
700 Ensearch Corporation..................................... 11,375
400 Nicor, Inc. ............................................. 11,000
1,300 Noram Energy Corp. ...................................... 11,538
200 Oneok, Inc. ............................................. 4,575
1,100 Pacific Enterprises, Ltd. ............................... 31,075
1,829 Panhandle Eastern Corporation............................ 50,983
300 Peoples Energy Corp. .................................... 9,525
1,000 Sonat, Inc. ............................................. 35,625
2,800 Tenneco, Inc. ........................................... 138,950
1,600 Williams Companies, Inc. ................................ 70,200
-----------
610,922
-----------
GOLD--0.7%
4,300 Barrick Gold Corp. ...................................... 113,412
1,800 Echo Bay Mines, Ltd. .................................... 18,675
1,425 Engelhard Corp. ......................................... 30,994
2,700 Freeport McMoran Copper & Gold........................... 75,937
1,500 Homestake Mining Co. .................................... 23,438
1,124 Newmont Mining Corp. .................................... 50,861
3,000 Placer Dome, Inc. ....................................... 72,375
2,200 Santa Fe Pacific Gold Corp. ............................. 26,675
-----------
412,367
-----------
HEALTH CARE--3.4%
9,400 Abbott Laboratories, Inc. ............................... 392,450
400 Bausch & Lomb, Inc. ..................................... 15,850
3,400 Baxter International, Inc. .............................. 142,375
600 Becton Dickinson & Co. .................................. 45,000
1,300 Beverly Enterprises, Inc.(c)............................. 13,813
1,300 Biomet, Inc.(c).......................................... 23,238
2,100 Boston Scientific Corp.(c)............................... 102,900
5,791 Columbia Healthcare Corp. ............................... 293,893
1,300 Community Psychiatric Centers(c)......................... 15,925
3,300 Corning, Inc. ........................................... 105,600
400 C.R. Bard, Inc. ......................................... 12,900
2,100 Humana, Inc.(c).......................................... 57,487
400 Manor Care, Inc. ........................................ 14,000
3,600 Medtronics, Inc. ........................................ 201,150
400 Millipore Corp. ......................................... 16,450
600 St. Jude Medical, Inc.(c)................................ 25,800
3,000 Tenet Healthcare Corp.(c)................................ 62,250
2,600 U.S. Healthcare, Inc. ................................... 120,900
2,300 United Healthcare Corp. ................................. 150,650
700 United States Surgical Corp. ............................ 14,963
1,900 Warner-Lambert Company................................... 184,537
-----------
2,012,131
-----------
HOTELS AND RESTAURANTS--1.1%
600 Bally Entertainment Group(c)............................. 8,400
2,200 Darden Restaurants, Inc.(c).............................. 26,125
1,750 Harrahs Entertainment, Inc. ............................. 42,438
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
HOTELS AND RESTAURANTS--(CONTINUED)
400 Hilton Hotels Corp. ..................................... $ 24,600
200 Luby's Cafeterias, Inc. ................................. 4,450
1,700 Marriott Corporation..................................... 65,025
8,600 McDonald's Corp. ........................................ 388,075
875 Promus Companies, Inc. .................................. 19,469
400 Ryans Family Steak Houses(c)............................. 2,800
800 Shoney's, Inc.(c)........................................ 8,200
1,400 Wendys International, Inc. .............................. 29,750
-----------
619,332
-----------
INTERNATIONAL OIL--4.3%
8,300 Chevron Corporation...................................... 435,750
15,800 Exxon Corporation........................................ 1,265,975
5,400 Mobil Corporation........................................ 604,800
1,200 Oryx Energy Corp.(c)..................................... 16,050
2,700 Texaco, Inc. ............................................ 211,950
-----------
2,534,525
-----------
LEISURE--0.3%
1,200 Brunswick Corp. ......................................... 28,800
1,400 Hasbro, Inc. ............................................ 43,400
3,000 Mattel, Inc. ............................................ 92,250
100 Outboard Marine Corp. ................................... 2,038
-----------
166,488
-----------
LIFE INSURANCE--0.4%
2,600 American General Corp. .................................. 90,675
525 Jefferson Pilot Corp. ................................... 24,413
1,400 Providian Corp. ......................................... 57,050
600 Transamerica Corp. ...................................... 43,725
1,050 USLife Corp. ............................................ 31,369
-----------
247,232
-----------
LIQUOR--0.7%
300 Adolph Coors Co. ........................................ 6,638
2,900 Anheuser-Busch Companies, Inc. .......................... 193,937
1,100 Brown Forman Corp. "B"................................... 40,150
5,100 Seagram Company, Ltd. ................................... 176,587
-----------
417,312
-----------
MEDIA--2.3%
2,000 Capital Cities/ABC, Inc. ................................ 246,750
2,600 Comcast Corp. ........................................... 47,288
200 Handleman Co. ........................................... 1,150
250 King World Productions(c)................................ 9,719
8,500 Tele-Communications A(c)................................. 168,937
5,000 Time-Warner, Inc. ....................................... 189,375
1,000 Tribune Co. ............................................. 61,125
4,857 Viacom, Inc.(c).......................................... 230,100
6,700 Walt Disney Co. ......................................... 395,300
-----------
1,349,744
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
METALS--0.3%
800 Asarco, Inc. ............................................ $ 25,600
1,050 Cyprus Amax Minerals Co. ................................ 27,431
1,400 Inco, Ltd. .............................................. 46,550
1,000 Phelps Dodge Corp. ...................................... 62,250
-----------
161,831
-----------
MORTGAGE--1.1%
2,400 Federal Home Loan Mortgage Corp. ........................ 200,400
3,500 Federal National Mortgage Association.................... 434,437
-----------
634,837
-----------
MOTOR VEHICLES--2.2%
4,800 Chrysler Corp. .......................................... 265,800
1,300 Dana Corp. .............................................. 38,025
400 Echlin, Inc. ............................................ 14,600
800 Fleetwood Enterprises, Inc. ............................. 20,600
13,500 Ford Motor Co. .......................................... 391,500
9,600 General Motors Corp. .................................... 507,600
100 Nacco Industries, Inc. .................................. 5,550
1,220 Navistar International Corp., Inc.(c).................... 12,810
345 Paccar, Inc. ............................................ 14,533
500 Varity Corp.(c).......................................... 18,563
-----------
1,289,581
-----------
OIL DISTRIBUTION--2.9%
1,200 Amerada Hess Corp. ...................................... 63,600
6,400 Amoco Corp. ............................................. 460,000
800 Ashland Oil Co. ......................................... 28,100
800 Coastal Corp. ........................................... 29,800
6,800 Royal Dutch Petroleum Co. ADR(d)......................... 959,650
800 Sun, Inc. ............................................... 21,900
3,000 Unocal Corp. ............................................ 87,375
4,000 USX Marathon Group....................................... 78,000
-----------
1,728,425
-----------
OIL SERVICES--0.6%
2,000 Baker Hughes, Inc. ...................................... 48,750
1,300 Halliburton Co. ......................................... 65,812
300 Helmerich & Payne, Inc. ................................. 8,925
1,100 Rowan Companies, Inc.(c)................................. 10,863
3,100 Schlumberger, Ltd. ...................................... 214,675
300 Western Atlas, Inc.(c)................................... 15,150
-----------
364,175
-----------
OTHER INSURANCE--2.7%
1,200 Aetna Life and Casualty Company.......................... 83,100
5,686 Allstate Corp. .......................................... 233,837
5,812 American International Group, Inc. ...................... 537,610
800 Chubb Corp. ............................................. 77,400
1,000 CIGNA Corp. ............................................. 103,250
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
OTHER INSURANCE--(CONTINUED)
800 General Reinsurance Corp................................. $ 124,000
1,200 Lincoln National Corp., Inc. ............................ 64,500
1,400 Loews Corp. ............................................. 109,725
1,000 Safeco Corp.............................................. 34,500
600 St. Paul Companies, Inc. ................................ 33,375
1,450 Torchmark, Inc........................................... 65,612
1,700 UNUM Corp................................................ 93,500
2,100 USF&G Corp. ............................................. 35,438
-----------
1,595,847
-----------
PAPER--1.7%
1,600 Alco Standard Corp....................................... 73,000
633 Boise Cascade Corp....................................... 21,918
1,100 Champion International Corp.............................. 46,200
800 Federal Paper Board, Inc................................. 41,500
1,200 Georgia Pacific Corp. ................................... 82,350
3,800 International Paper Co. ................................. 143,925
900 James River Corp......................................... 21,713
3,806 Kimberly Clark Corp...................................... 314,946
900 Mead Corp. .............................................. 47,025
200 Potlatch Corp. .......................................... 8,000
1,100 Stone Container Corp..................................... 15,813
500 Union Camp Corp.......................................... 23,813
675 Westvaco Corporation..................................... 18,731
2,500 Weyerhaeuser Co. ........................................ 108,125
700 Willamette Industries, Inc............................... 39,375
-----------
1,006,434
-----------
PHOTOGRAPHY--0.5%
4,050 Eastman Kodak Co. ....................................... 271,350
800 Polaroid Corp............................................ 37,900
-----------
309,250
-----------
POLLUTION CONTROL--0.5%
2,800 Browning-Ferris Industries, Inc.......................... 82,600
3,200 Laidlaw, Inc. ........................................... 32,800
700 Safety Kleen Corp. ...................................... 10,938
6,300 WMX Technologies, Inc. .................................. 188,212
-----------
314,550
-----------
PRODUCER GOODS--6.4%
2,600 American Brands, Inc..................................... 116,025
2,000 Applied Materials, Inc.(c)............................... 78,750
700 Briggs & Stratton Corp. ................................. 30,363
2,900 Caterpillar Tractor Co. ................................. 170,375
700 Cincinnati Milacron, Inc. ............................... 18,375
200 Crane Co. ............................................... 7,375
700 Cummins Engine, Inc. .................................... 25,900
4,200 Deere & Co. ............................................. 148,050
2,000 Dover Corporation........................................ 73,750
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
1,600 Dresser Industries, Inc.................................. $ 39,000
1,000 Eaton Corp............................................... 53,625
3,100 Emerson Electric Co. .................................... 253,425
300 Foster Wheeler Corp. .................................... 12,750
21,900 General Electric Co...................................... 1,576,800
500 General Signal Corp. .................................... 16,188
1,400 Genuine Parts Company.................................... 57,400
400 Giddings & Lewis, Inc.................................... 6,600
300 Harnischfeger Industries, Inc............................ 9,975
1,300 Illinois Tool Works, Inc. ............................... 76,700
1,300 ITT Corp. ............................................... 68,900
1,300 ITT Industries, Inc. .................................... 31,200
1,200 Ingersoll Rand Co. ...................................... 42,150
300 Johnson Controls, Inc. .................................. 20,625
600 Mallinckrodt Group, Inc. ................................ 21,825
600 McDermott International, Inc. ........................... 13,200
5,300 Minnesota Mining & Mfg. Co............................... 351,125
400 National Services Industries, Inc. ...................... 12,950
800 Owens Corning Fiberglas Co.(c)........................... 35,900
1,400 Pall Corp................................................ 37,625
600 Parker Hannifin Corp. ................................... 20,550
300 Perkin Elmer Corp. ...................................... 11,325
300 Snap-On Tools Corp. ..................................... 13,575
300 Stanley Works............................................ 15,450
1,000 Textron, Inc. ........................................... 67,500
200 Timken Co. .............................................. 7,650
700 Trinova Corp. ........................................... 20,038
1,000 TRW, Inc................................................. 77,500
2,000 TYCO International Ltd. ................................. 71,250
900 W.W. Grainger, Inc....................................... 59,625
-----------
3,771,389
-----------
PROPERTY--0.0%
300 Kaufman & Broad Home Corp................................ 4,463
200 Pulte Corp. ............................................. 6,725
-----------
11,188
-----------
PUBLISHING--0.9%
1,100 American Greetings Corp. ................................ 30,387
2,100 Gannet Co., Inc. ........................................ 128,887
300 John H. Harland Co....................................... 6,263
800 Jostens, Inc............................................. 19,400
600 Knight-Ridder, Inc....................................... 37,500
400 McGraw-Hill Companies, Inc. ............................. 34,850
200 Meredith Corp. .......................................... 8,375
1,200 Moore Corp., Ltd......................................... 22,350
1,000 New York Times Co........................................ 29,625
1,700 R.R. Donnelley & Sons Co. ............................... 66,937
1,900 Time Mirror Co........................................... 64,363
5,600 U.S. West Media Group, Inc.(c)........................... 106,400
-----------
555,337
-----------
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
RAILROADS--1.1%
2,122 Burlington Northern, Inc................................. $ 165,516
900 Conrail, Inc............................................. 63,000
2,600 CSX Corporation.......................................... 118,625
1,500 Norfolk Southern Corp. .................................. 119,062
2,300 Union Pacific Corp....................................... 151,800
-----------
618,003
-----------
RETAIL--FOOD--0.7%
2,800 Albertson's, Inc. ....................................... 92,050
2,100 American Stores Co....................................... 56,175
300 Fleming Companies, Inc. ................................. 6,188
600 Giant Foods, Inc. ....................................... 18,900
800 Great Atlantic & Pacific Tea Company, Inc. .............. 18,400
1,400 Kroger Co.(c)............................................ 52,500
1,300 SuperValu Stores, Inc. .................................. 40,950
2,700 Sysco Corp. ............................................. 87,750
1,200 Winn-Dixie Stores, Inc................................... 44,250
-----------
417,163
-----------
RETAIL--OTHER--4.0%
1,400 Charming Shoppes, Inc.(c)................................ 4,025
1,200 Circuit City Stores, Inc................................. 33,150
800 Dayton Hudson Corp. ..................................... 60,000
1,700 Dillard Department Stores, Inc........................... 48,450
2,600 Federated Department Stores.............................. 71,500
600 Harcourt General, Inc.................................... 25,125
5,849 Home Depot, Inc.......................................... 280,021
2,500 J.C. Penney Company, Inc................................. 119,062
5,900 K-Mart Corp.(c).......................................... 42,775
200 Longs Drug Stores Corp. ................................. 9,575
2,400 Lowes Companies, Inc. ................................... 80,400
2,700 May Department Stores Co. ............................... 114,075
1,100 Melville Corporation..................................... 33,825
250 Mercantile Stores Co., Inc. ............................. 11,563
1,400 Nordstrom, Inc. ......................................... 56,700
900 Pep Boys: Manny, Moe & Jack.............................. 23,063
2,239 Price Costco.(c)......................................... 34,145
900 Rite Aid Corp............................................ 30,825
5,300 Sears, Roebuck & Co...................................... 206,700
1,200 Tandy Corp. ............................................. 49,800
2,600 The Gap, Inc. ........................................... 109,200
4,400 The Limited, Inc......................................... 76,450
1,300 TJX Companies, Inc. ..................................... 24,537
3,475 Toys R Us, Inc.(c)....................................... 75,581
2,600 Walgreen Co. ............................................ 77,675
28,700 Wal-Mart Stores, Inc..................................... 642,162
1,800 Woolworth Corp.(c)....................................... 23,400
-----------
2,363,784
-----------
SERVICES--3.9%
800 Alexander & Alexander Services........................... 15,200
600 Autodesk, Inc. .......................................... 20,550
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
2,000 Automatic Data Processing, Inc........................... $ 148,500
600 Ceridian Corp.(c)........................................ 24,750
3,000 Computer Associates International, Inc. ................. 170,625
700 Computer Sciences Corp.(c)............................... 49,175
2,100 CUC International, Inc.(c)............................... 71,662
1,000 De Luxe Corp. ........................................... 29,000
1,200 Dow Jones & Co., Inc. ................................... 47,850
2,320 Dun & Bradstreet Corp. .................................. 150,220
400 EG & G, Inc.............................................. 9,700
2,600 First Data Corp.......................................... 173,875
1,200 H & R Block, Inc. ....................................... 48,600
400 Intergraph Corp.(c)...................................... 6,300
800 Interpublic Group Companies, Inc......................... 34,700
1,000 Marsh & McLennan Companies............................... 88,750
7,800 Microsoft Corp.(c)....................................... 684,450
4,500 Novell, Inc.(c).......................................... 64,125
300 Ogden Corp............................................... 6,413
5,750 Oracle Systems Corp.(c).................................. 243,656
800 Pittston Service Group................................... 25,100
800 Ryder Systems, Inc....................................... 19,800
1,050 Service Corporation International........................ 46,200
200 Shared Medical System.................................... 10,875
4,400 Westinghouse Electric Corp............................... 72,600
-----------
2,262,676
-----------
SOAPS--1.5%
400 Clorox Co. .............................................. 28,650
1,700 Colgate Palmolive Co. ................................... 119,425
1,100 Dial Corp. .............................................. 32,587
700 Ecolab, Inc. ............................................ 21,000
6,600 Gillette Co. ............................................ 344,025
1,300 International Flavours & Fragrances, Inc. ............... 62,400
1,900 Newell Co. .............................................. 49,163
800 Premark International, Inc. ............................. 40,500
1,800 Ralston Purina Co. ...................................... 112,275
2,200 Rubbermaid, Inc. ........................................ 56,100
-----------
866,125
-----------
STEEL & IRON--0.2%
1,300 Armco, Inc.(c)........................................... 7,638
1,200 Bethlehem Steel Corp.(c)................................. 16,800
300 Inland Steel Industries, Inc. ........................... 7,538
1,000 Nucor Corp. ............................................. 57,125
1,020 USX US Steel Corp. ...................................... 31,365
1,200 Worthington Industries, Inc. ............................ 24,975
-----------
145,441
-----------
TELEPHONE--8.4%
6,400 Airtouch Communications.................................. 180,800
2,400 ALLTEL Corp. ............................................ 70,800
6,900 Ameritech Corp. ......................................... 407,100
20,535 AT & T Corp. ............................................ 1,329,641
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED) SHORT-TERM INVESTMENT--0.8%
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
TELEPHONE--(CONTINUED)
5,600 Bell Atlantic Corp....................................... $ 374,500
13,000 BellSouth Corp. ......................................... 565,500
12,500 GTE Corp. ............................................... 550,000
8,400 MCI Communications Corp. ................................ 219,450
4,400 NYNEX Corp. ............................................. 237,600
5,100 Pacific Telesis Group.................................... 171,487
7,600 SBC Communications, Inc. ................................ 437,000
4,400 Sprint Corp. ............................................ 175,450
5,600 U.S. West, Inc.(c)....................................... 200,200
-----------
4,919,528
-----------
THRIFT--0.3%
700 Golden West Financial Corp. ............................. 38,675
1,450 Great Western Financial Corp. ........................... 36,975
1,300 H.F. Ahmanson & Co....................................... 34,450
1,300 ITT Hartford Group, Inc.................................. 62,888
-----------
172,988
-----------
TIRES AND RUBBER GOODS--0.2%
600 Cooper Tire & Rubber Co. ................................ 14,775
1,600 Goodyear Tire & Rubber Company........................... 72,600
-----------
87,375
-----------
TOBACCO--1.8%
10,700 Philip Morris Companies, Inc. ........................... 968,350
3,000 UST, Inc. ............................................... 100,125
-----------
1,068,475
-----------
TRUCKING AND FREIGHT--0.0%
300 Consolidated Freightways, Inc. .......................... 7,950
300 Roadway Services, Inc. .................................. 14,663
300 Yellow Corp.(c).......................................... 3,713
-----------
26,326
-----------
Total Common Stocks
(Identified cost $42,697,809)........................... 58,132,899
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$481,000 Repurchase Agreement with State Street Bank & Trust
Co. dated 12/29/95 at 5.000% to be repurchased at
$481,267 on 1/02/96 collateralized by $425,000, U.S.
Treasury Notes 8.750% due 8/15/00, with a value of
$496,185............................................. $ 481,000
-----------
Total Short Term Investment
(Identified Cost $481,000)........................... 481,000
-----------
Total Investments---99.9%
(Identified Cost $43,178,809)(b)..................... 58,613,899
Cash and Receivables.................................. 164,890
Liabilities........................................... (108,167)
-----------
TOTAL NET ASSETS--100%................................ $58,670,622
===========
(a) See Note 1A.
(b) Federal Tax Information:
At December 31,1995 the net unrealized appreciation on investments based on
cost of $43,311,699 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost............................................. $16,007,152
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value........................................... (704,952)
-----------
Net unrealized appreciation........................... $15,302,200
===========
</TABLE>
(c) Non-income producing security.
(d) An American Depository Receipt (ADR) is a certificate issued by a U.S.
bank representing the right to receive securities of the foreign issuer
described. The values of ADR's are significantly influenced by trading on
exchanges not located in the United States or Canada.
See accompanying notes to financial statements.
47
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................... $58,613,899
Cash.................................................... 201
Receivable for:
Fund shares sold........................................ 47,719
Dividends and interest.................................. 116,412
Foreign taxes........................................... 206
Due from advisor........................................ 352
-----------
LIABILITIES 58,778,789
Payable for:
Fund shares redeemed.................................... $28,583
Accrued expenses:
Management fees......................................... 4,953
Deferred trustees' fees................................. 33,492
Other expenses.......................................... 41,139
-------
108,167
-----------
$58,670,622
===========
NET ASSETS
Net Assets consist of:
Capital paid in......................................... $43,247,821
Undistributed net investment income..................... 20,255
Accumulated net realized losses......................... (32,544)
Unrealized appreciation on investments.................. 15,435,090
-----------
NET ASSETS............................................... $58,670,622
===========
Computation of offering price:
Net asset value and redemption price per share
($58,670,622 divided by 586,173 shares of beneficial in-
terest)................................................. $ 100.09
===========
Identified cost of investments........................... $43,178,809
===========
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................ $ 1,212,104(a)
Interest............................................. 54,033
-----------
1,266,137
EXPENSES
Management fees...................................... $122,359
Trustees' fees and expenses.......................... 24,480
Custodian............................................ 67,024
Audit and tax services............................... 11,400
Legal................................................ 7,727
Printing............................................. 27,426
Registration......................................... 7
Miscellaneous........................................ 3,933
--------
Total expenses...................................... 264,356
Less expenses assumed by the investment adviser..... (68,581) 195,775
-------- -----------
NET INVESTMENT INCOME................................. 1,070,362
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments--net.................... 775,273
Unrealized appreciation on investments--net.......... 13,212,050
-----------
Net gain on investment transactions................... 13,987,323
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............ $15,057,685
===========
</TABLE>
(a) Net of foreign taxes of: $7,954
See accompanying notes to financial statements.
48
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 861,746 $ 1,070,362
Net realized gain on investments.................. 85,627 775,273
Unrealized appreciation (depreciation) on
investments...................................... (489,644) 13,212,050
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS............ 457,729 15,057,685
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (861,687) (1,050,107)
Net realized gain on investments.................. (74,418) (673,888)
Paid in capital................................... (28,861) 0
------------ ------------
(964,966) (1,723,995)
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 18,433,352 17,851,781
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 861,687 1,050,107
Distributions from net realized gain.............. 74,418 673,888
Distributions from paid in capital................ 28,861 0
------------ ------------
19,398,318 19,575,776
Cost of shares redeemed........................... (10,543,643) (11,403,132)
------------ ------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS..................................... 8,854,675 8,172,644
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 8,347,438 21,506,334
NET ASSETS
Beginning of the year............................. 28,816,850 37,164,288
------------ ------------
End of the year................................... $ 37,164,288 $ 58,670,622
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year............................. $ (2,244) $ 0
============ ============
End of the year................................... $ 0 $ 20,255
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 241,694 202,803
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 11,363 10,562
Distributions from net realized gain.............. 983 6,778
Distributions from Paid-in Capital................ 421
------------ ------------
254,461 220,143
Redeemed.......................................... (138,029) (127,215)
------------ ------------
Net change........................................ 116,432 92,928
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................. $108.49 $137.39 $ 72.00 $ 76.48 $ 75.35
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............ 3.56 8.35 1.54 1.80 1.88
Net Realized and Unrealized Gain
(Loss) on Investments........... 29.29 2.02 5.18 (0.92) 25.89
------- ------- ------- ------- -------
Total From Investment Operations. 32.85 10.37 6.72 0.88 27.77
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Distributions From Net Investment
Income.......................... (3.56) (8.35) (1.36) (1.82) (1.85)
Distributions in Excess of Net
Investment Income............... 0.00 0.00 (0.18) 0.00 0.00
Distributions From Net Realized
Capital Gains................... (0.39) (67.41) (0.55) (0.16) (1.18)
Distributions in Excess of Net
Realized Capital Gains.......... 0.00 0.00 (0.15) 0.00 0.00
Distributions From Paid-in
Capital......................... 0.00 0.00 0.00 (0.03) 0.00
------- ------- ------- ------- -------
Total Distributions.............. (3.95) (75.76) (2.24) (2.01) (3.03)
------- ------- ------- ------- -------
Net Asset Value, End of Year...... $137.39 $ 72.00 $ 76.48 $ 75.35 $100.09
======= ======= ======= ======= =======
TOTAL RETURN (%).................. 30.37 7.30 9.72 1.14 36.88
Ratio of Operating Expenses to
Average Net Assets (%)........... 0.36 0.35 0.34 0.33 0.40
Ratio of Net Investment Income to
Average Net Assets (%)........... 2.86 2.63 2.52 2.59 2.20
Portfolio Turnover Rate (%)....... 2 17 12 2 5
Net Assets, End of Year (000)..... $20,496 $10,172 $28,817 $37,164 $58,671
The ratios of expenses to average
net assets without giving effect
to the voluntary expense
limitations described in Note 4
to the Financial Statements would
have been (%).................... -- -- -- -- 0.54
</TABLE>
See accompanying notes to financial statements.
49
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--54.1% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--2.2%
3,700 Lockheed Martin Corp. ................................... $ 292,300
2,600 Raytheon Co. ............................................ 122,850
-----------
415,150
-----------
AUTOMOBILES--2.4%
3,800 Chrysler Corp. .......................................... 210,425
4,500 General Motors Corp. .................................... 237,937
-----------
448,362
-----------
BANKS/SAVINGS & LOAN--2.8%
3,900 Chemical Banking Corp. .................................. 229,125
700 First Interstate Bancorp. ............................... 95,550
5,100 Fleet Financial Group, Inc. ............................. 207,825
-----------
532,500
-----------
CHEMICALS--3.9%
3,100 E.I. Du Pont de Nemours & Co. ........................... 216,613
2,000 Georgia Gulf Corp(c)..................................... 61,500
4,400 PPG Industries, Inc. .................................... 201,300
7,800 Praxair, Inc. ........................................... 262,275
-----------
741,688
-----------
ELECTRONIC COMPONENTS--2.7%
3,300 Intel Corp. ............................................. 187,275
3,200 Micron Technology, Inc. ................................. 126,800
3,700 Texas Instruments, Inc. ................................. 191,475
-----------
505,550
-----------
ELECTRICAL EQUIPMENT--1.5%
2,100 General Electric Co. .................................... 151,200
2,600 Honeywell, Inc. ......................................... 126,425
-----------
277,625
-----------
ENGINEERING & CONSTRUCTION--0.6%
4,800 McDermott International, Inc. ........................... 105,600
-----------
FINANCIAL SERVICES--2.7%
2,900 Federal Home Loan Mortgage Corp. ........................ 242,150
1,900 Federal National Mortgage Association.................... 235,837
700 MBNA Corp ............................................... 25,813
-----------
503,800
-----------
FREIGHT--TRANSPORTATION--3.3%
12,100 Canadian Pacific Ltd. ................................... 219,312
5,900 Consolidated Freightways, Inc. .......................... 156,350
3,400 Federal Express Corp.(c)................................. 251,175
-----------
626,837
-----------
HEALTH CARE--MEDICAL TECHNOLOGY--1.3%
7,400 C.R. Bard, Inc. ......................................... 238,650
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
HEALTH CARE--SERVICES--0.8%
14,100 Beverly Enterprises, Inc.(c).............................. $ 149,813
-----------
HOME PRODUCTS--1.2%
4,600 Premark International, Inc. .............................. 232,875
-----------
HOUSING & BUILDING MATERIALS--2.3%
3,400 Armstrong World Industries, Inc. ......................... 210,800
7,300 Masco Corp. .............................................. 229,038
-----------
439,838
-----------
INSURANCE--4.8%
5,900 Ace Ltd. ................................................. 234,525
1,650 American International Group Inc. ........................ 152,625
1,700 Chubb Corp. .............................................. 164,475
5,800 Providian Corp. .......................................... 236,350
4,700 Prudential Reinsurance Hldgs., Inc. ...................... 109,862
-----------
897,837
-----------
LEISURE--1.9%
4,800 American Greetings Corp. ................................. 132,600
9,600 Carnival Corp. ........................................... 234,000
-----------
366,600
-----------
MACHINERY--0.2%
900 Case Corp. ............................................... 41,175
-----------
MULTI-INDUSTRY--2.4%
4,700 Allied Signal, Inc. ...................................... 223,250
6,500 Philips Electronics NV.................................... 233,188
-----------
456,438
-----------
NATURAL GAS--PIPELINES--0.6%
900 El Paso Natural Gas Co. .................................. 25,538
1,600 Mapco Inc. ............................................... 87,400
-----------
112,938
-----------
OFFICE EQUIPMENT--2.7%
10,500 EMC Corp. ................................................ 161,437
1,400 International Business Machines........................... 128,450
1,600 Xerox Corp. .............................................. 219,200
-----------
509,087
-----------
OIL--MAJOR INTEGRATED--1.9%
7,100 Repsol S.A., ADR(d)....................................... 233,412
600 Sun, Inc. ................................................ 16,425
4,300 Ultramar Corp. ........................................... 110,725
-----------
360,562
-----------
PAPER PRODUCTS--1.5%
5,800 Crown Cork and Seal Co., Inc.(c) ......................... 242,150
800 Mead Corp. ............................................... 41,800
-----------
283,950
-----------
</TABLE>
See accompanying notes to financial statements.
52
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
REAL ESTATE INVESTMENT TRUST--1.3%
6,800 Meditrust SBI........................................... $ 237,150
-----------
RETAIL--FOOD & DRUG--1.3%
5,400 Eckerd Corp............................................. 240,975
-----------
TELECOMMUNICATIONS--1.9%
5,200 GTE Corp................................................ 228,800
4,100 Telefonos de Mexico SA.................................. 130,687
-----------
359,487
-----------
TOBACCO--3.5%
2,900 Loews Corp.............................................. 227,288
2,200 Philip Morris Companies, Inc............................ 199,100
7,000 UST, Inc................................................ 233,625
-----------
660,013
-----------
UTILITIES--ELECTRIC--2.4%
7,800 Pacific Gas & Electric Co............................... 221,325
12,700 SCE Corp................................................ 225,425
-----------
446,750
-----------
Total Common Stocks
(Identified Cost $9,404,472)........................... 10,191,250
-----------
PREFERRED STOCK--0.5%
TOBACCO--0.4%
10,600 RJR Nabisco Holdings Corp............................... 67,575
-----------
OIL--MAJOR INTEGRATED--0.1%
300 Sun, Inc................................................ 8,325
-----------
Total Preferred Stock
(Identified Cost $73,537).............................. 75,900
-----------
MEDIUM & LONG TERM BONDS & NOTES--39.2%
<CAPTION>
FACE
AMOUNT
<C> <S> <C>
BANKS--1.1%
$100,000 Bankers Trust, NY Corp. 8.125%, 4/01/02................. 109,769
50,000 Chase Manhattan Corp. 9.050%, 2/01/02................... 51,556
50,000 Norwest Corp. 7.650%, 3/15/05........................... 55,374
-----------
216,699
-----------
CABLE & MEDIA--1.4%
250,000 TCI Communications, Inc.
7.390%, 8/28/01........................................ 261,913
-----------
ENERGY--0.9%
125,000 Coastal Corp. 8.125% 9/15/02............................ 136,721
25,000 Standard Oil Co. 9.000%, 6/01/19........................ 28,062
-----------
164,783
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
FINANCE--5.5%
$125,000 Associates Corp. NA 8.350%, 12/22/98................... $ 134,219
115,000 Avalon Propertys, Inc. 7.375%, 9/15/02................. 118,620
200,000 Ford Motor Credit Corp. 6.850%, 8/15/00................ 207,152
244,000 General Motors Acceptance Corp.
5.500%, 12/15/01...................................... 235,643
100,000 General Motors Corp. 9.125%, 7/15/01................... 114,008
50,000 International Lease Finance Corp.
8.040%, 12/01/97...................................... 52,096
100,000 Secured Finance Investment, Inc.
9.05%, 12/15/04....................................... 118,026
50,000 Standard Credit Card 8.625%, 1/07/02................... 52,736
-----------
1,032,500
-----------
GOVERNMENT--6.0%
200,000 U.S. Treasury Notes 5.875%, 5/31/96.................... 200,500
300,000 U.S. Treasury Notes 5.125%, 3/31/98.................... 299,484
25,000 U.S. Treasury Notes 8.250%, 7/15/98.................... 26,758
300,000 U.S. Treasury Notes 6.875%, 8/31/99.................... 315,282
100,000 U.S. Treasury Notes 7.500%, 10/31/99................... 107,359
175,000 U.S. Treasury Bonds 5.500%, 4/15/00.................... 176,449
-----------
1,125,832
-----------
GOVERNMENT AGENCY--2.3%
50,000 Federal Home Loan Banks 8.150%, 2/24/99................ 50,126
350,000 Federal Home Loan Banks 7.151%, 9/12/05................ 355,358
30,000 Federal National Mortgage Association Zero Coupon
10/10/01.............................................. 28,781
-----------
434,265
-----------
HEALTH CARE--0.3%
50,000 Columbia/HCA Healthcare Corp.
8.020%, 8/5/02........................................ 54,836
-----------
INDUSTRIAL--4.6%
175,000 Anheuser Busch Companies, Inc.
8.500%, 3/01/17....................................... 182,875
250,000 Coca Cola Enterprises, Inc.
8.750%, 4/01/17....................................... 262,375
200,000 Martin Marietta Corp. 6.500%, 4/15/03.................. 206,488
200,000 Tektronix, Inc. 7.625%, 8/15/02........................ 209,732
-----------
861,470
-----------
LEISURE & LODGING--1.1%
100,000 Carnival Corp. 7.050%, 5/15/05......................... 104,698
100,000 La Quinta Inns, Inc. 7.400%, 9/15/05................... 103,000
-----------
207,698
-----------
</TABLE>
See accompanying notes to financial statements.
53
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
MEDIUM & LONG TERM BONDS & NOTES--(CONTINUED)
SHORT-TERM INVESTMENTS--6.4%
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
MORTGAGED BACKED--3.4%
$200,000 Federal Home Loan Mortgage
8.000%, 7/15/21....................................... $ 211,624
50,000 G.E. Capital Mortgage Inc.
10.000%, 3/25/24...................................... 52,453
75,000 Paine Webber CMO Tr. 9.000%, 10/20/03.................. 77,344
75,000 Westam Mortgage Financial Corp.
8.950%, 8/01/18....................................... 80,555
200,000 Westam Mortgage Financial Corp.
9.400%, 12/01/18...................................... 213,312
-----------
635,288
-----------
RETAIL STORES--1.9%
170,000 Sears Overseas Finance Zero Coupon 7/12/98............. 147,368
200,000 Toys R US, Inc. 8.250%, 2/01/17........................ 209,956
-----------
357,324
-----------
SECURITIES--6.5%
200,000 Donaldson Lufkin & Jennrette
6.875%, 11/01/05...................................... 205,002
100,000 Lehman Bros. Inc. 5.750% 11/15/98 ..................... 99,108
200,000 Lehman Bros. Inc. 7.375% 5/15/07....................... 209,874
100,000 Merrill Lynch & Co. 8.375%, 2/09/00.................... 108,824
250,000 Paine Webber Group, Inc.
7.750%, 9/01/02....................................... 261,430
145,000 Salomon, Inc. 7.500%, 2/01/03.......................... 149,447
200,000 Smith Barney Holdings, Inc.
5.500%, 1/15/99....................................... 198,316
-----------
1,232,001
-----------
TELECOMMUNICATIONS--1.1%
200,000 Southern Bell Telephone & Telegraph Co. 7.625%,
3/15/13............................................... 205,664
-----------
TRANSPORTATION--0.8%
25,000 American Airlines 10.180%, 1/02/13..................... 29,944
100,000 AMR Corp 10.290%, 3/08/21.............................. 127,911
-----------
157,855
-----------
UTILITIES--2.0%
250,000 Cincinnati Gas & Electric Co.
7.375%, 11/01/01...................................... 253,780
130,000 General Telephone of California
7.125%, 12/01/98...................................... 130,720
-----------
384,500
-----------
YANKEE/SUPRANATIONAL--0.3%
50,000 SKF Aktiebolaget AB 7.625% 7/15/03 .................... 53,232
-----------
Total Bonds & Notes
(Identified Cost $7,147,215).......................... 7,385,860
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
413,000 American General Finance Corp.
5.550%, 1/02/96....................................... $ 413,000
800,000 Associates Corp. of North America
5.950%, 1/02/96....................................... 800,000
-----------
Total Short-Term Investments
(Identified Cost $1,213,000).......................... 1,213,000
-----------
Total Investments--100.2%
(Identified Cost $17,838,224)(b)...................... 18,866,010
Cash and Receivables................................... 410,926
Liabilities............................................ (454,260)
-----------
TOTAL NET ASSETS--100%................................. $18,822,676
===========
(a) See Note 1a.
(b) Federal Tax Information:
At December 31, 1995 the net unrealized appreciation on investments based on
cost of $17,838,224 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost.............................................. $ 1,278,891
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value............................................ (251,105)
-----------
Net unrealized appreciation............................ $ 1,027,786
===========
</TABLE>
(c) Non-income producing security.
(d) An American Depository Receipt (ADR) is a certificate issued by a U.S.
bank representing the right to receive securities of the foreign issuer
described. The values of ADRs are significantly influenced by trading on
exchanges not located in the United States or Canada.
See accompanying notes to financial statements.
54
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value..................................... $18,866,010
Cash..................................................... 865
Receivable for:
Fund shares sold......................................... 67,963
Securities sold.......................................... 165,257
Dividends and interest................................... 152,428
Foreign taxes............................................ 275
Due from advisor......................................... 16,433
Unamortized organization expense......................... 7,705
-----------
19,276,936
LIABILITIES
Payable for:
Securities purchased..................................... $415,763
Fund shares redeemed..................................... 593
Withholding Taxes........................................ 126
Accrued expenses:
Management fees.......................................... 7,628
Other expenses........................................... 30,150
--------
454,260
-----------
$18,822,676
===========
NET ASSETS
Net Assets consist of:
Capital paid in.......................................... $17,655,390
Undistributed net investment income...................... 1,050
Accumulated net realized gains........................... 138,450
Unrealized appreciation on investments................... 1,027,786
-----------
NET ASSETS................................................ $18,822,676
===========
Computation of offering price:
Net asset value and redemption price per share
($18,822,676 divided by 1,575,093 shares of beneficial
interest)................................................ $ 11.95
===========
Identified cost of investments............................ $17,838,224
===========
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends.............................................. $ 124,041(a)
Interest............................................... 338,426
----------
462,467
EXPENSES
Management fees........................................ $65,752
Trustees' fees and expenses............................ 15,049
Custodian.............................................. 56,354
Audit and tax services................................. 20,694
Legal.................................................. 10,821
Printing............................................... 2,299
Registration........................................... 7
Amortization of organization expenses.................. 2,347
Miscellaneous.......................................... 2,604
-------
Total expenses........................................ 175,927
Less expenses assumed by the investment adviser....... (96,085) 79,842
------- ----------
NET INVESTMENT INCOME................................... 382,625
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments---net..................... 426,765
Unrealized appreciation on investments--net............ 1,029,622
----------
Net gain on investment transactions..................... 1,456,387
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............. $1,839,012
==========
</TABLE>
(a)Net of foreign taxes of: $735
See accompanying notes to financial statements.
55
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES BALANCED SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 31, 1994 (A)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
-------------------- ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income...................... $ 12,585 $ 382,625
Net realized gain on investments 0 426,765
Unrealized appreciation (depreciation) on
investments............................... (1,836) 1,029,622
---------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS..... 10,749 1,839,012
---------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income...................... (12,334) (382,625)
In excess of net investment income......... 0 (1,297)
Net realized gain on investments........... 0 (288,315)
---------- -----------
(12,334) (672,237)
---------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares............... 2,157,989 18,594,352
Net asset value of shares issued in connec-
tion with the reinvestment of:
Distributions from net investment income... 12,335 383,922
Distributions from net realized gain....... 0 288,315
---------- -----------
2,170,324 19,266,589
Cost of shares redeemed.................... (446,397) (4,333,030)
---------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS........................ 1,723,927 14,933,559
---------- -----------
TOTAL INCREASE IN NET ASSETS............... 1,722,342 16,100,334
NET ASSETS
Beginning of the year...................... 1,000,000 2,722,342
---------- -----------
End of the year............................ $2,722,342 $18,822,676
========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year...................... $ 0 $ 251
========== ===========
End of the year............................ $ 251 $ 1,050
========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares............. 217,577 1,626,505
Issued in connection with the reinvestment
of:
Distributions from net investment income... 1,242 32,426
Distributions from net realized gain....... 0 24,351
---------- -----------
218,819 1,683,282
Redeemed................................... (44,926) (382,082)
---------- -----------
Net change................................. 173,893 1,301,200
========== ===========
(a) Commencement of Operations
FINANCIAL HIGHLIGHTS
<CAPTION>
OCTOBER 31, 1994*
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
-------------------- ------------
<S> <C> <C>
Net Asset Value, Beginning of Year.......... $ 10.00 $ 9.94
---------- -----------
Income From Investment Operations
Net Investment Income...................... 0.05 0.26
Net Realized and Unrealized Gain
(Loss) on Investments...................... (0.06) 2.20
---------- -----------
Total From Investment Operations........... (0.01) 2.46
---------- -----------
Less Distributions
Distributions From Net Investment Income... (0.05) (0.26)
Distributions From Net Realized Capital
Gains..................................... 0.00 (0.19)
---------- -----------
Total Distributions........................ (0.05) (0.45)
---------- -----------
Net Asset Value, End of Year................ $ 9.94 $ 11.95
========== ===========
TOTAL RETURN (%)............................ (0.10)*** 24.79
Ratio of Operating Expenses to Average Net
Assets (%)................................. 0.85** 0.84
Ratio of Net Investment Income to Average
Net Assets (%)............................. 4.16** 4.03
Portfolio Turnover Rate (%)................. 0** 72
Net Assets, End of Year (000)............... $ 2,722 $ 18,823
The ratios of expenses to average net assets
without giving effect to the voluntary
expense limitations described in Note 4 to
the Financial Statements would have been
(%)........................................ 3.73** 1.85
</TABLE>
* Commencement of operations.
** Computed on an annualized basis.
*** Not computed on an annualized basis.
See accompanying notes to financial statements.
56
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--67.2% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
AEROSPACE--1.0%
5,025 Boeing Co. ............................................... $ 393,834
14,600 Rockwell International Corp. ............................. 771,975
2,500 United Technologies Corp. ................................ 237,187
-----------
1,402,996
-----------
AIR TRANSPORT--0.0%
255 UAL, Inc.(c).............................................. 45,518
-----------
APPAREL--0.2%
7,400 Melville Corp. ........................................... 227,550
-----------
AUTOMOBILE & RELATED--1.3%
15,432 Chrysler Corp. ........................................... 854,547
4,600 Ford Motor Co. ........................................... 133,400
12,500 General Motors Corp. ..................................... 660,937
6,750 Genuine Parts Co. ........................................ 276,750
-----------
1,925,634
-----------
BANKS--3.2%
29,260 Banc One Corp. ........................................... 1,104,565
10,144 Bank America Corp. ....................................... 656,824
5,400 Bankers Trust New York Corp. ............................. 359,100
19,000 Citicorp.................................................. 1,277,750
10,900 J.P. Morgan & Co., Inc. .................................. 874,725
7,200 Nations Bank Corp. ....................................... 501,300
-----------
4,774,264
-----------
BUSINESS MACHINES--1.8%
8,500 Apple Computer............................................ 270,938
28,400 Digital Equipment Corp.(c)................................ 1,821,150
5,900 International Business Machines Corp. .................... 541,325
-----------
2,633,413
-----------
BUSINESS SERVICES--1.5%
28,500 Browing Ferris Industries, Inc. .......................... 840,750
10,000 Dun & Bradstreet Corp. ................................... 647,500
9,200 H & R Block, Inc. ........................................ 372,600
39,200 Rollins Environmental Services............................ 112,700
9,500 WMX Technologies.......................................... 283,812
-----------
2,257,362
-----------
CHEMICALS--2.9%
14,200 Allied-Signals, Inc. ..................................... 674,500
8,200 Dow Chemical Co. ......................................... 577,075
13,700 E.I. Du Pont de Nemours & Co. ............................ 957,288
11,200 Monsanto Co. ............................................. 1,372,000
15,600 PPG Industries, Inc. ..................................... 713,700
-----------
4,294,563
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
COMMUNICATION--5.8%
15,000 Airtouch Communications................................... $ 437,875
35,200 Ameritech Corp. .......................................... 2,076,800
27,261 AT&T Co. ................................................. 1,765,150
12,200 Bell Atlantic Corp. ...................................... 815,875
16,200 Bellsouth Corp. .......................................... 704,700
10,600 GTE Corp. ................................................ 466,400
14,600 NYNEX Corp. .............................................. 788,400
15,500 Pacific Telesis Group..................................... 521,188
7,200 SBC Comunications, Inc. .................................. 414,000
9,700 U.S. West, Inc. .......................................... 346,775
9,700 U.S. West, Inc. .......................................... 184,300
-----------
8,521,463
-----------
CONGLOMERATES--0.7%
2,200 ITT Corp. New............................................. 116,600
13,800 Minnesota Mining & Mfg. Co. .............................. 914,250
-----------
1,030,850
-----------
CONSTRUCTION--1.2%
28,600 Home Depot................................................ 1,369,225
14,900 Masco Corp. .............................................. 467,487
-----------
1,836,712
-----------
CONSUMER DURABLES--0.0%
800 Whirlpool Corp. .......................................... 42,600
-----------
DOMESTIC OIL--1.5%
2,400 Amoco Corp. .............................................. 172,500
2,700 Atlantic Richfield Co. ................................... 299,025
3,600 Halliburton Co. .......................................... 182,250
69,300 Oryx Energy Co. .......................................... 926,887
934 Santa Fe Energy, Inc.(c).................................. 8,990
3,601 Sun Company............................................... 98,577
800 Tenneco, Inc. ............................................ 39,700
15,600 Unocal Corp. ............................................. 454,350
-----------
2,182,279
-----------
DRUGS & MEDICINE--6.0%
8,800 Abbott Laboratories....................................... 367,400
11,000 American Home Products Corp. ............................. 1,067,000
37,100 Baxter International, Inc. ............................... 1,553,563
15,200 Eli Lilly & Co. .......................................... 855,000
5,200 Johnson & Johnson......................................... 445,250
31,500 Merck & Co., Inc. ........................................ 2,071,125
19,200 Pfizer, Inc. ............................................. 1,209,600
18,705 Pharmacia & Upjohn, Inc. ................................. 724,819
10,800 Schering Plough Corp. .................................... 591,300
-----------
8,885,057
-----------
</TABLE>
See accompanying notes to financial statements.
59
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
ELECTRONICS--3.7%
43,200 AMP, Inc. ................................................ $ 1,657,800
9,400 Emerson Electric Co. ..................................... 768,450
22,400 Hewlett-Packard........................................... 1,876,000
6,400 Motorola, Inc. ........................................... 364,800
15,400 Raytheon Co. ............................................. 727,650
-----------
5,394,700
-----------
ENERGY & UTILITIES--3.1%
18,300 American Electric Power, Inc. ............................ 741,150
11,700 Consolidated Edison Co. .................................. 374,400
45,700 Pacific Gas & Electric Co. ............................... 1,296,738
7,700 Public Service Enterprise Group........................... 235,812
40,200 SCE Corp. ................................................ 713,550
10,200 Southern Co. ............................................. 251,175
8,900 Texas Utilities Co. ...................................... 366,013
17,300 Unicom Corp. ............................................. 566,575
-----------
4,545,413
-----------
ENERGY RAW MATERIALS--1.0%
58,800 Occidental Petroleum Corp. ............................... 1,256,850
3,200 Schlumberger Ltd. ........................................ 221,600
-----------
1,478,450
-----------
ENTERTAINMENT--0.0%
2,200 ITT Industry, Inc. ....................................... 52,800
-----------
FINANCE--0.7%
11,600 Federal Home Loan Mortgage Corp. ......................... 968,600
-----------
FOOD & AGRICULTURE--4.6%
19,900 Coca Cola Co. ............................................ 1,477,575
5,000 General Mills, Inc. ...................................... 288,750
41,850 H. J. Heinz Co. .......................................... 1,386,281
24,600 Kellogg Co. .............................................. 1,900,350
8,100 Pepsico, Inc. ............................................ 452,587
13,300 Ralston Purina Co. ....................................... 829,587
16,000 Sara Lee Corp. ........................................... 510,000
-----------
6,845,130
-----------
GOLD--0.2%
18,434 Santa Fe Pac Gold Corp. .................................. 223,512
-----------
INSURANCE--2.3%
11,500 Aetna Life & Casualty Co. ................................ 796,375
10,568 Allstate Corp. ........................................... 434,609
14,400 American General Corp. ................................... 502,200
6,468 American International Group, Inc. ....................... 598,290
2,700 CIGNA Corp. .............................................. 278,775
4,300 General Reinsurance Corp. ................................ 666,500
2,200 ITT Hartford Group........................................ 106,425
-----------
3,383,174
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
INTERNATIONAL OIL--4.7%
11,000 Chevron Corp. ............................................ $ 577,500
9,400 Cooper Industries, Inc. .................................. 345,450
25,100 Exxon Corp. .............................................. 2,011,138
7,800 Mobil Corp. .............................................. 873,600
9,800 Royal Dutch Petroleum Co. ADR(d).......................... 1,383,025
21,200 Texaco, Inc. ............................................. 1,664,200
-----------
6,854,913
-----------
LIQUOR--0.4%
3,300 Anheuser-Busch Companies, Inc. ........................... 220,687
11,700 Seagram, Ltd. ............................................ 405,113
-----------
625,800
-----------
MEDIA--2.3%
21,000 Capital Cities/ABC, Inc. ................................. 2,590,875
3,000 Gannett Co., Inc. ........................................ 184,125
15,200 Tele Communications Inc., NE.............................. 302,100
3,800 Telecommunications Inc., NE............................... 102,125
7,200 Time Warner, Inc. ........................................ 272,700
-----------
3,451,925
-----------
MISCELLANEOUS FINANCE--1.3%
25,000 American Express Co. ..................................... 1,034,375
4,449 Dean Witter Discover & Co. ............................... 209,103
5,000 Lehman Brothers Holdings, Inc. ........................... 106,250
16,900 Salomon, Inc. ............................................ 599,950
-----------
1,949,678
-----------
NON-FERROUS METALS--0.7%
8,075 Alcan Aluminum Ltd. ...................................... 251,334
14,000 Aluminum Co. of America................................... 740,250
220 USX U.S. Steel Corp. ..................................... 6,765
-----------
998,349
-----------
OFFICE EQUIPMENT--1.6%
16,900 Xerox Corp. .............................................. 2,315,300
-----------
OPTICAL PHOTO, EQUIPMENT--0.2%
3,600 Eastman Kodak Co. ........................................ 241,200
-----------
PAPER & FOREST PRODUCTS--1.3%
12,640 Burlington Northern Santa Fe.............................. 985,920
3,600 Georgia-Pacific Corp. .................................... 247,050
11,800 International Paper Co. .................................. 446,925
1,400 Kimberly Clark Corp. ..................................... 115,850
4,050 Weyerhaeuser Co. ......................................... 175,162
-----------
1,970,907
-----------
PRODUCER OF GOODS--2.5%
5,600 Caterpillar, Inc. ........................................ 329,000
24,000 Deere & Co. .............................................. 846,000
34,400 General Electric Co. ..................................... 2,476,800
4,200 Westinghouse Electric Corp. .............................. 69,300
-----------
3,721,100
-----------
</TABLE>
See accompanying notes to financial statements.
60
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS--(CONTINUED)
MEDIUM & LONG TERM BONDS & NOTES--
31.6%
<TABLE>
<CAPTION>
SHARES VALUE (A)
<C> <S> <C>
RAILROADS & SHIPPING--0.4%
4,500 Norfolk Southern Corp. ................................. $ 357,187
4,200 Union Pacific Corp. .................................... 277,200
-----------
634,387
-----------
RESTAURANTS--0.3%
5,000 Darden Restaurants, Inc. ............................... 59,375
9,200 McDonald's Corp. ....................................... 415,150
-----------
474,525
-----------
RETAIL--2.7%
19,000 Albertsons, Inc. ....................................... 624,625
8,000 Dayton Hudson Corp. .................................... 600,000
15,600 J.C. Penney Company, Inc. .............................. 742,950
38,900 K-Mart Corp.(c)......................................... 282,025
5,400 Limited, Inc. .......................................... 93,825
7,800 May Department Stores Co. .............................. 329,550
11,400 Sears Roebuck and Co. .................................. 444,600
11,625 Toys R US(c)............................................ 252,844
29,200 Wal-Mart Stores, Inc. .................................. 653,350
-----------
4,023,769
-----------
SOAPS & COSMETICS--2.8%
6,260 Bristol-Myers Squibb Co. ............................... 537,577
18,400 Gillette Co. ........................................... 959,100
10,300 Procter & Gamble Co. ................................... 854,900
12,400 Unilever, N.V. ......................................... 1,745,300
-----------
4,096,877
-----------
STEEL--0.9%
64,700 USX Marathon Group...................................... 1,261,650
-----------
TOBACCO--1.1%
8,500 American Brands, Inc. .................................. 379,313
13,600 Philip Morris Companies, Inc. .......................... 1,230,800
140 Schweitzer Mauduit International, Inc. ................. 3,238
-----------
1,613,351
-----------
TRAVEL & RECREATION--1.3%
33,700 Walt Disney Productions................................. 1,988,300
-----------
Total Common Stock
(Identified cost $67,482,155).......................... 99,174,071
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
CORPORATE BONDS--16.8%
$ 2,000,000 Appalachian Power Co.
8.750%, 2/01/22.................................... $ 2,065,000
2,500,000 Banco de Comercio Exterior,
8.625%, 6/02/00.................................... 2,587,500
1,000,000 Boston Edison Co.
7.800%, 5/15/10.................................... 1,083,510
2,000,000 Cemex SA
8.875%, 6/10/98.................................... 1,928,750
2,000,000 Lehman Brothers Holdings, Inc.
8.500%, 5/01/07.................................... 2,244,240
1,730,000 Lehman Brothers Holdings, Inc.
8.800%, 3/01/15.................................... 2,005,485
1,000,000 Maxus Energy Corp.
9.375% 11/01/03.................................... 980,000
1,000,000 Paramount Communications, Inc.
8.250%, 8/01/22.................................... 1,033,130
1,485,000 Public Service Electric & Gas Co.
8.750%, 11/01/21................................... 1,592,455
2,100,000 Salomon, Inc.
6.700%, 12/01/98................................... 2,109,765
3,000,000 Tele Communications, Inc.
9.800%, 2/1/12..................................... 3,597,510
10,000,000 Time Warner Inc., Zero Coupon,
12/17/12........................................... 3,512,500
30,000 Viacom, Inc.
8.000%, 7/07/06.................................... 30,525
-----------
24,770,370
-----------
FOREIGN--4.4%
8,500,000 Government of Canada,
8.000%, 06/01/23(e)................................ 6,526,544
-----------
YANKEE--9.5%
3,000,000 Hydro Quebec,
9.400%, 2/01/21.................................... 3,807,690
2,000,000 Hydro Quebec,
8.050%, 7/07/24.................................... 2,283,520
5,000,000 News America Holdings, Inc.
9.250%, 2/01/13.................................... 5,889,200
1,500,000 Province of Manitoba,
9.125%, 1/15/18.................................... 1,943,310
-----------
13,923,720
-----------
U.S. GOVERNMENT BONDS--0.9%
564,805 Government National Mortgage Association,10.000%,
9/15/18............................................ 624,833
644,823 Government National Mortgage Association,11.500%
with various maturities to 2013.................... 736,674
-----------
1,361,507
-----------
Total Medium & Long Term Bonds & Notes
(Identified Cost $43,505,501)...................... 46,582,141
-----------
</TABLE>
See accompanying notes to financial statements.
61
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
SHORT-TERM INVESTMENT--0.5%
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
755,000 Household Finance Corp.
5.650%, 1/02/96...................................... $ 754,882
------------
Short-Term Investments
(Identified Cost $754,882)........................... 754,882
------------
Total Investments--99.3%
(Identified Cost $111,742,538)(b).................... 146,511,094
Cash and Receivables.................................. 1,297,345
Liabilities........................................... (272,703)
------------
TOTAL NET ASSETS--100%................................ $147,535,736
============
(a) See Note 1A.
(b) Federal Tax Information:
At December 31, 1995 the net unrealized appreciation on investments based on
cost of $111,742,538 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost............................................. $ 37,122,196
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value........................................... (2,353,640)
------------
Net unrealized appreciation........................... $ 34,768,556
============
</TABLE>
(c) Non-income producing security.
(d) An American Depository Receipt (ADR) is a certificate issued by a U.S. bank
representing the right to receive securities of the foreign issuer
described. The values of ADRs are significantly influenced by trading on
exchanges not located in the United States or Canada.
(e) Denominated in Canadian dollars.
See accompanying notes to financial statements.
62
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................... $146,511,094
Cash.................................................... 135,411
Receivable for:
Fund shares sold........................................ 51,543
Dividends and interest.................................. 1,109,230
Foreign taxes........................................... 1,161
------------
147,808,439
LIABILITIES
Payable for:
Fund shares redeemed.................................... $117,533
Withholding taxes....................................... 263
Dividends declared...................................... 14
Accrued expenses:
Management fees......................................... 62,259
Deferred trustees' fees................................. 30,097
Other expenses.......................................... 62,537
--------
272,703
------------
$147,535,736
============
NET ASSETS
Net Assets consist of:
Capital paid in......................................... $112,364,892
Undistributed net investment income..................... 45,930
Accumulated net realized gains.......................... 356,254
Unrealized appreciation on investments and foreign
currency............................................... 34,768,660
------------
NET ASSETS............................................... $147,535,736
============
Computation of offering price:
Net asset value and redemption price per share
($147,535,736 divided by 902,267 shares of beneficial
interest)............................................... $ 163.52
============
Identified cost of investments........................... $111,742,538
============
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends.......................................... $ 2,472,077(a)
Interest........................................... 3,879,528
-----------
6,351,605
EXPENSES
Management fees.................................... $ 675,739
Trustees' fees and expenses........................ 34,040
Custodian.......................................... 63,948
Audit and tax services............................. 15,400
Legal.............................................. 12,300
Printing........................................... 58,064
Registration....................................... 7
Miscellaneous...................................... 4,504
-----------
Total expenses.................................... 864,002
864,002
-----------
NET INVESTMENT INCOME............................... 5,487,603
REALIZED AND UNREALIZED GAIN ON INVESTMENTS, FUTURES
CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS
Realized gain on:
Investments--net................................... 2,204,391
Futures contracts closed--net...................... 84,750
Foreign currency transactions--net................. 277,284
-----------
Total realized gain on investments and foreign
currency transactions............................ 2,566,425
-----------
Unrealized appreciation on:
Investments--net................................... 28,568,142
Foreign currency transactions--net 105
-----------
Total unrealized appreciation on investments and
foreign currency transactions.................... 28,568,247
-----------
Net gain on investment transactions................. 31,134,672
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.......... $36,622,275
===========
</TABLE>
(a) Net of foreign taxes of: $17,070
See accompanying notes to financial statements.
63
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 4,885,826 $ 5,487,603
Net realized gain (loss) on investments and for-
eign currency transactions....................... (1,227,890) 2,566,425
Unrealized appreciation (depreciation) on invest-
ments, and foreign currency transactions......... (4,971,428) 28,568,247
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. (1,313,492) 36,622,275
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (4,847,688) (5,487,603)
In excess of net investment income................ 0 (212,274)
Net realized gain on investments.................. 0 (764,206)
------------ ------------
(4,847,688) (6,464,083)
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 38,433,190 22,221,525
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 4,847,688 5,699,877
Distributions from net realized gain.............. 0 764,206
------------ ------------
43,280,878 28,685,608
Cost of shares redeemed........................... (36,581,093) (33,185,396)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM
CAPITAL SHARE TRANSACTIONS....................... 6,699,785 (4,499,788)
------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 538,605 25,658,404
NET ASSETS
Beginning of the year............................. 121,338,727 121,877,332
------------ ------------
End of the year................................... $121,877,332 $147,535,736
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year............................. $ 6,388 $ 85
============ ============
End of the year................................... $ 85 $ 45,930
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 285,556 150,563
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 37,014 35,150
Distributions from net realized gain.............. 0 4,713
------------ ------------
322,570 190,426
Redeemed.......................................... (271,720) (223,554)
------------ ------------
Net change........................................ 50,850 (33,128)
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1991 1992 1993 1994 1995
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year.......................... $112.79 $127.87 $ 130.26 $ 137.18 $ 130.30
------- ------- -------- -------- --------
Income From Investment Opera-
tions
Net Investment Income......... 6.41 5.14 4.35 5.42 6.34
Net Realized and Unrealized
Gain (Loss) on Investments... 16.23 3.45 9.58 (6.92) 34.33
------- ------- -------- -------- --------
Total From Investment Opera-
tions........................ 22.64 8.59 13.93 (1.50) 40.67
------- ------- -------- -------- --------
Less Distributions
Distributions From Net Invest-
ment Income.................. (6.41) (5.13) (4.36) (5.38) (6.34)
Distributions in Excess of Net
Investment Income............ 0.00 0.00 0.00 0.00 (0.23)
Distributions From Net Real-
ized Capital Gains........... (1.15) (1.07) (2.65) 0.00 (0.88)
------- ------- -------- -------- --------
Total Distributions........... (7.56) (6.20) (7.01) (5.38) (7.45)
------- ------- -------- -------- --------
Net Asset Value, End of Year... $127.87 $130.26 $ 137.18 $ 130.30 $ 163.52
======= ======= ======== ======== ========
TOTAL RETURN (%)............... 20.17 6.70 10.65 (1.11) 31.26
Ratio of Operating Expenses to
Average Net Assets (%)........ 0.55 0.54 0.53 0.54 0.64
Ratio of Net Investment Income
to Average Net Assets (%)..... 5.45 5.32 3.65 3.98 4.06
Portfolio Turnover Rate (%).... 36 36 22 76 51
Net Assets, End of Year (000).. $49,995 $77,575 $121,339 $121,877 $147,536
</TABLE>
See accompanying notes to financial statements.
64
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
BONDS & NOTES--80.4% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
CORPORATE BONDS--31.6%
$ 150,000 American Safety Razor Co. 9.875%, 8/01/05........... $ 153,000
150,000 Bally's Park Place Funding 9.250%, 3/15/04.......... 151,875
100,000 Berry Plastics 12.250%, 4/15/04..................... 105,750
150,000 Borg Warner Sec. Corp.
9.125%, 5/01/03.................................... 135,187
150,000 Cole National Group, Inc. 11.250%, 10/01/01......... 150,750
100,000 Crown Paper Co. 11.000%, 9/01/05.................... 87,750
100,000 Empress River Casino Financial Corp. 10.750%,
4/01/02............................................ 103,250
150,000 Grand Casino, Inc.
10.125%, 12/01/03.................................. 156,750
150,000 Harris Chemical of North America, Inc. Zero Coupon,
7/15/01 (n)........................................ 144,000
100,000 Herff Jones, Inc. 11.000%, 8/15/05.................. 107,250
200,000 In Flight Phone Corp.
zero coupon, 5/15/02(j) (n)........................ 74,000
150,000 Jordan Industries, Inc.
10.375%, 8/01/03................................... 133,500
150,000 Katz Corp. 12.750%, 11/15/02 ....................... 158,063
250,000 Marcus Cable Co.
Zero Coupon, 12/15/05 (n).......................... 170,000
150,000 Pathmark Stores, Inc. 9.625%, 5/01/03............... 145,313
150,000 RBX Corp. 11.250%, 10/15/05......................... 148,125
150,000 Renco Metals, Inc. 12.000%, 7/15/00................. 151,500
150,000 Selmer, Inc. 11.000%, 5/15/05....................... 148,875
150,000 Sinclair Broadcast Group, Inc. 10.000%, 9/30/05..... 153,750
100,000 Specialty Retailers, Inc. 11.000%, 8/15/03.......... 91,000
150,000 Telex Communications, Inc. 12.000%, 7/15/04......... 154,875
100,000 United States Leasing International 8.450%, 1/25/05. 114,291
50,000 Waters Corp. 12.750%, 9/30/04....................... 56,625
-----------
2,995,479
-----------
FOREIGN CORPORATE BONDS--1.7%
300,000 International Semi Tech. Zero Coupon, 8/15/03 (n)... 163,500
-----------
FOREIGN GOVERNMENT BONDS--29.6%
400,000 Argentina (Republic of)
6.5000%, 3/31/05................................... 285,000
1,000,000 Belgium (Kingdom of) 6.500%, 3/31/05(c)............. 33,530
583,665 Brazil (Federal Republic of) C Bonds 4.000%,
4/15/14............................................ 334,878
190,000 Brazil (Federal Republic of) 6.6875%, 1/01/01....... 169,290
250,000 Brazil (Federal Republic of) 4.250%, 4/15/24........ 132,813
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$ 500,000 Bulgaria (National Republic of) 2.000%, 7/28/12..... $ 132,500
14,000 Canada (Government of) 6.250%, 2/01/98(d)........... 10,304
28,000 Canada (Government of) 9.000%, 12/01/04(d).......... 23,110
30,000 Denmark (Kingdom of) 7.000%, 12/15/04(e)............ 5,381
60,000 Denmark (Kingdom of) 9.000%, 11/15/98(e)............ 11,771
50,000 Dutch (Government of) 6.250%, 7/15/98(f)............ 32,639
45,000 Dutch (Government of) 7.000%, 6/15/05(f)............ 29,992
500,000 Ecuador (Republic of) 3.000%, 2/28/25............... 181,563
210,000 Germany (Federal Republic of) 6.000%, 2/20/98(g).... 152,540
290,000 Germany (Federal Republic of) 8.375%, 5/21/01(g).... 231,413
120,000 Germany (Federal Republic of) 7.375%, 1/03/05(g).... 91,416
75,000,000 Italy (Republic of) 9.500%, 12/01/97(h)............. 46,730
30,000,000 Italy (Republic of) 9.500%, 1/01/05(h).............. 17,693
50,000 Indah Kiat International Finance Co.
12.500%, 6/15/06 .................................. 52,188
9,000,000 Japan 4.200%, 9/21/15(i)............................ 93,138
250,000 Mexico Par Series B 6.250%, 12/31/19(j)............. 163,750
700,000 Poland (Republic of) 3.750%, 10/27/14............... 451,500
430,000 Spain (Government of) 10.000%, 2/28/05(k)........... 3,595
2,320,000 Spain (Government of) 11.450%, 8/30/98(k)........... 20,098
65,000 UK Treasury 7.000%, 11/06/01(l)..................... 101,073
-----------
2,807,905
-----------
U.S. GOVERNMENT BONDS--17.5%
500,000 Federal Home Loan Bank 6.490%, 9/08/97.............. 509,735
375,000 Federal National Mortgage Association 7.520%,
8/26/05............................................ 381,900
300,000 Federal National Mortgage Association 6.500%,
1/01/99............................................ 296,343
90,000 United States Treasury Bond 6.125%, 5/31/97......... 91,139
100,000 United States Treasury Bond 5.625%, 11/30/00........ 100,996
100,000 United States Treasury Bond 6.500%, 8/15/05......... 106,615
150,000 United States Treasury Bond 6.875%, 8/15/25......... 169,171
-----------
1,655,899
-----------
Total Bonds & Notes
(Identified Cost $7,433,037)....................... 7,622,783
-----------
</TABLE>
See accompanying notes to financial statements.
67
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
SHORT-TERM INVESTMENTS--19.7%
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$ 1,869,000 Repurchase agreement with State Street Bank & Trust
Company dated 12/29/95 at 5.750% to be repurchased
at $1,870,194 on 1/2/96 collateralized by
$1,900,000. U.S. Treasury Note 5.125% due 4/30/98
with a value of $1,911,039........................ $ 1,869,000
-----------
Total Short-Term Investment
(Identified Cost $1,869,000)...................... 1,869,000
-----------
Total Investments--100.1%
(Identified Cost $9,302,037)(b)................... 9,491,783
Cash and Receivables(m)............................ 2,155,052
Liabilities........................................ (2,162,711)
-----------
TOTAL NET ASSETS--100%............................. $ 9,484,124
===========
(a) See Note 1a.
(b) Federal Tax Information:
At December 31, 1995 the net unrealized appreciation on investments based on
cost of $9,303,178 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost..................................... $ 283,052
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value................................... (94,447)
-----------
Net unrealized appreciation........................ $ 188,605
===========
</TABLE>
(c) Denominated in Belgium francs.
(d) Denominated in Canadian dollars.
(e) Denominated in Danish kroner.
(f) Denominated in Netherland guilden.
(g) Denominated in German marks.
(h) Denominated in Italian lire.
(i) Denominated in Japanese yen.
(j) Rights attached.
(k) Denominated in Spanish pesetas.
(l) Denominated in Great British pound sterling.
(m) Including deposits in foreign denominated currencies with a value of
$21,814 and a cost of $21,724.
(n) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
See accompanying notes to financial statements.
68
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value:
Securities............................................. $ 7,622,783
Repurchase agreements.................................. 1,869,000
-----------
Total investments..................................... 9,491,783
Cash................................................... 145
Foreign cash at value.................................. 21,814
Receivable for:
Fund shares sold....................................... 120,471
Open forward currency contracts........................ 1,800,807
Accrued interest....................................... 187,837
Foreign taxes.......................................... 271
Due from advisor....................................... 16,000
Unamortized organization expense....................... 7,707
-----------
11,646,835
LIABILITIES
Payable for:
Securities purchased................................... $ 295,750
Open forward currency contracts........................ 1,837,293
Fund shares redeemed................................... 450
Withholding Taxes...................................... 288
Accrued expenses:
Management fees........................................ 2,288
Other expenses......................................... 26,642
----------
2,162,711
-----------
$ 9,484,124
===========
NET ASSETS
Net Assets consist of:
Capital paid in........................................ $ 9,260,335
Undistributed net investment income.................... 50,354
Accumulated net realized gains......................... 19,941
Unrealized appreciation on investments, forward
contracts and foreign currency........................ 153,494
-----------
NET ASSETS.............................................. $ 9,484,124
===========
Computation of offering price:
Net asset value and redemption price per share
($9,484,124 divided by 874,477 shares of beneficial
interest).............................................. $ 10.85
===========
Identified cost of investments.......................... $ 9,302,037
===========
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest................................................ $506,785(a)
--------
506,785
EXPENSES
Management fees......................................... $ 35,085
Trustees' fees and expenses............................. 15,052
Custodian............................................... 47,259
Audit and tax services.................................. 19,800
Legal................................................... 10,821
Printing................................................ 1,550
Registration............................................ 7
Insurance............................................... 49
Amortization of organization expenses................... 2,345
Miscellaneous........................................... 2,033
--------
Total expenses......................................... 134,001
Less expenses assumed by the investment adviser........ (88,120) 45,881
-------- --------
NET INVESTMENT INCOME.................................... 460,904
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FORWARD CURRENCY CONTRACTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gain on:
Investments--net........................................ 238,818
Foreign currency transactions--net...................... 9,623
--------
Total realized gain on investments and foreign currency
transactions.......................................... 248,441
--------
Unrealized appreciation (depreciation) on:
Investments--net........................................ 222,618
Foreign currency transactions--net...................... (14,528)
--------
Total unrealized appreciation on investments, forwards
contracts and foreign currency transactions........... 208,090
--------
Net gain on investment transactions...................... 456,531
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS............... $917,435
========
</TABLE>
(a) Net of foreign taxes of: $889
See accompanying notes to financial statements.
69
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 31, 1994 (A) YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, 1994 1995
-------------------- ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income...................... $ 40,922 $ 460,904
Net realized gain (loss) on investments and
foreign currency transactions............. (36,161) 248,441
Unrealized appreciation (depreciation) on
investments, and foreign currency transac-
tions..................................... (54,596) 208,090
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM OP-
ERATIONS.................................. (49,835) 917,435
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income...................... (40,922) (435,233)
In excess of investment income............. (1,078) 0
Net realized gain on investments........... 0 (170,001)
----------- -----------
(42,000) (605,234)
----------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares............... 1,060,215 9,873,846
Net asset value of shares issued in connec-
tion with the reinvestment of:
Distributions from net investment income... 42,000 435,233
Distributions from net realized gain....... 0 170,001
----------- -----------
1,102,215 10,479,080
Cost of shares redeemed.................... (1,060,215) (4,757,322)
----------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS........................ 42,000 5,721,758
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS.... (49,835) 6,033,959
NET ASSETS
Beginning of the year...................... 3,500,000 3,450,165
----------- -----------
End of the year............................ $ 3,450,165 $ 9,484,124
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year...................... $ 0 $ 0
=========== ===========
End of the year............................ $ 0 $ 50,354
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares............. 106,727 919,222
Issued in connection with the reinvestment
of:
Distributions from net investment income... 4,325 40,562
Distributions from net realized gain....... 0 15,844
----------- -----------
111,052 975,628
Redeemed................................... (106,727) (455,476)
----------- -----------
Net change................................. 4,325 520,152
=========== ===========
</TABLE>
(a) Commencement of Operations
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
OCTOBER 31, 1994 * YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, 1994 1995
------------------ ------------
<S> <C> <C>
Net Asset Value, Beginning of Year............. $10.00 $ 9.74
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income......................... 0.12 0.58
Net Realized and Unrealized Gain (Loss) on
Investments.................................. (0.26) 1.30
------ ------
Total From Investment Operations.............. (0.14) 1.88
------ ------
LESS DISTRIBUTIONS
Distributions From Net Investment Income...... (0.12) (0.55)
Distributions From Net Realized Capital Gains. 0.00 (0.22)
------ ------
Total Distributions........................... (0.12) (0.77)
------ ------
Net Asset Value, End of Year................... $ 9.74 $10.85
====== ======
TOTAL RETURN (%)............................... (1.40)*** 19.38
Ratio of Operating Expenses to Average Net
Assets (%).................................... 0.85 ** 0.84
Ratio of Net Investment Income to Average Net
Assets (%).................................... 7.05 ** 8.39
Portfolio Turnover Rate (%).................... 403 202
Net Assets, End of Year (000).................. $3,450 $9,484
The ratios of expenses to average net assets
without giving effect to the voluntary expense
limitations described in Note 4 to the
Financial Statements would have been (%)...... 2.01 ** 2.44
</TABLE>
* Commencement of Operations
** Computed on an annualized basis.
*** Not computed on an annualized basis.
See accompanying notes to financial statements.
70
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
BONDS & NOTES--92.7% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
CORPORATE BONDS AND NOTES--66.3%
BROADCASTING--1.0%
$1,500,000 Viacom Inc. 7.625%, 1/15/16.......................... $ 1,517,655
------------
CHEMICALS--3.5%
4,850,000 Dow Chemical Co.
8.550%, 10/15/09.................................... 5,745,260
------------
FINANCIAL--6.8%
4,000,000 American General Financing, 8.450%, 10/15/09......... 4,734,680
4,160,000 Associates Corp. of North America, 8.550%, 7/15/09... 4,995,203
1,275,000 Toronto Dominion Bank Ontario, 7.875%, 8/15/04....... 1,394,391
------------
11,124,274
------------
FOREIGN--4.1%
3,000,000 British Columbia Province Canada,
7.750%, 06/16/03.................................... 2,276,265
2,000,000 Government of Canada, 9.000%, 12/1/04(c)............. 1,650,751
2,250,000 Government of Canada, 7.500%, 09/01/00(c)............ 1,709,555
1,300,000 Ontario Hydro, 8.875%, 10/25/05(c)................... 1,025,815
------------
6,662,386
------------
LEISURE--2.5%
1,250,000 ITT Corp. 7.750%, 11/15/25........................... 1,281,250
2,500,000 Time Warner Inc. 9.150%, 2/01/23..................... 2,865,350
------------
4,146,600
------------
OIL AND GAS--4.7%
1,050,000 Coastal Corp. 10.000%, 2/01/01....................... 1,217,906
800,000 Oryx Energy Co. 10.000%, 6/15/99..................... 870,288
3,290,000 Oryx Energy Co. 10.000%, 4/01/01..................... 3,653,874
500,000 Oryx Energy Co. 8.000%, 10/15/03..................... 511,200
1,250,000 USX Marathon Group, 9.125%, 1/15/13.................. 1,437,175
------------
7,690,443
------------
PUBLISHING--4.0%
4,000,000 News America Holdings Inc. 9.500%, 7/15/24........... 4,952,680
2,150,000 Western Publishing Group, Inc. 7.650%, 9/15/02....... 1,526,500
------------
6,479,180
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
TELECOMMUNICATIONS--7.7%
$3,250,000 AT&T Corp. 8.350%, 1/15/25........................... $ 3,706,723
3,335,000 Tele-Communications Inc. 9.250%, 1/15/23............. 3,643,387
4,500,000 US West Communication, 8.875%, 6/01/31............... 5,244,525
------------
12,594,635
------------
UTILITIES--(DIVERSIFIED)--10.2%
1,250,000 Arizona Public Service Co. 10.250%, 5/15/20.......... 1,448,950
1,950,000 Long Island Lighting Co. 8.900%, 7/15/19............. 1,998,555
1,250,000 New York State Electric & Gas Co. 9.875%, 2/01/20.... 1,326,250
4,250,000 New York State Electric & Gas Co. 8.875%, 11/01/21... 4,662,633
7,000,000 Tennessee Valley Authority, 6.125%, 7/15/03.......... 7,077,490
------------
16,513,878
------------
UTILITIES--(ELECTRIC)--8.9%
1,500,000 Alabama Power Co.
8.750%, 12/01/21.................................... 1,599,975
4,200,000 Arizona Public Service Co. 8.000%, 12/30/15.......... 4,512,186
3,244,000 Ohio Edison, 9.120%, 5/30/16......................... 3,331,750
300,000 Texas Utilities Electric Co. 10.150%, 3/01/99........ 335,748
1,700,000 Texas Utilities Electric Co. 8.875%, 2/01/22......... 2,016,829
2,400,000 Texas Utilities Electric Co. 8.500%, 8/01/24......... 2,711,784
------------
14,508,272
------------
UTILITIES--(GAS)--3.7%
3,000,000 ANR Pipeline Co. 7.000% 6/01/25...................... 3,179,880
2,400,000 Southern California Gas Co. 8.750%, 10/01/21......... 2,813,520
------------
5,993,400
------------
YANKEE--9.2%
900,000 British Columbia Hydro & Power, 12.500%, 9/01/13..... 1,082,088
1,750,000 Canadian Pac. Limited,
8.850%, 06/01/22(c)................................. 2,031,488
4,000,000 Hydro Quebec, 8.050%, 7/07/24........................ 4,585,160
600,000 Maxus Energy Corp. 10.190%, 5/09/96.................. 603,000
1,500,000 Maxus Energy Corp. 11.500%, 11/15/15................. 1,560,000
</TABLE>
See accompanying notes to financial statements.
73
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
BONDS & NOTES--(CONTINUED) SHORT-TERM INVESTMENTS--5.5%
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
YANKEE--(CONTINUED)
$1,125,000 Mexico (United Mexican State) 6.250%, 12/31/19(d)... $ 736,875
450,000 Petroleos Mexicanos,
7.988%, 4/07/97.................................... 451,125
3,100,000 Petroleos Mexicanos,
8.625%, 12/01/23................................... 2,297,875
1,500,000 Republic of Coumbia
8.750%, 10/06/99(c)................................ 1,586,625
------------
14,934,236
------------
Total Corporate Bonds and Notes (Identified Cost
$101,828,372)...................................... 107,910,219
------------
U.S. GOVERNMENT AND AGENCIES--26.4%
58,620 Federal Home Loan Bank, 9.000%, 5/01/01............. 61,222
22,724 Federal Home Loan Bank, 9.000%, 9/01/01............. 23,732
6,000,000 Federal National Mortgage Association, 7.850%,
9/10/04............................................ 6,369,780
8,512,707 Government National Mortgage Association,
7.000% with various maturities to 2025............. 8,621,754
7,031,415 Government National Mortgage Association,
7.500% with various maturities to 2025............. 7,237,998
2,361,666 Government National Mortgage Association,
8.5000% with various maturities to 2022............ 2,481,237
256,441 Government National Mortgage Association,
9.000%, 10/15/16................................... 271,907
2,500,000 Student Loan Marketing Association, 7.820%,
10/14/99........................................... 2,541,050
1,500,000 U.S. Treasury Notes,
6.375%, 7/15/99.................................... 1,551,810
2,500,000 U.S. Treasury Notes, 8.500%, 11/15/00............... 2,831,125
3,500,000 U.S. Treasury Notes,
8.000%, 5/15/01.................................... 3,920,665
7,000,000 U.S. Treasury Notes,
5.750%, 8/15/03.................................... 7,094,150
------------
Total U.S. Government and Agencies (Identified Cost
$42,534,087)....................................... 43,006,430
------------
Total Bonds and Notes
(Identified Cost $144,362,459)..................... 150,916,649
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
COMMERCIAL PAPER--5.5%
$2,930,000 American Express Credit Corp. 5.000%, 1/02/96...... $ 2,929,593
6,000,000 Household Finance Corp. 5.65%, 1/02/96............. 5,999,058
------------
8,928,651
------------
Total Short-Term Investments (Identified Cost
$8,928,651)....................................... 8,928,651
------------
Total Investments--98.2%
(Identified Cost $153,291,110)(b)................. 159,845,300
Cash and Receivables............................... 3,181,792
Liabilities........................................ (315,142)
------------
TOTAL NET ASSETS--100%............................. $162,711,950
============
(a) See Note 1A.
(b) Federal Tax Information:
At December 31, 1995 the net unrealized appreciation on investments based on
cost of $153,322,185 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost..................................... $ 7,425,469
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value................................... (902,354)
------------
Net unrealized appreciation........................ $ 6,523,115
============
As of December 1995, the Series had a net tax basis capital loss
carryforward as follows:
Expiring December 31, 2002......................... $ 362,321
</TABLE>
(c) Denominated in Canadian dollars.
(d) Rights attached.
See accompanying notes to financial statements.
74
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................... $159,845,300
Cash.................................................... 7,615
Receivable for:
Fund shares sold........................................ 168,756
Accrued interest........................................ 3,005,421
------------
163,027,092
LIABILITIES
Payable for:
Fund shares redeemed.................................... 155,010
Withholding Taxes....................................... 157
Accrued expenses:
Management fees......................................... 54,164
Deferred trustees' fees................................. 33,695
Other expenses.......................................... 72,116
-------
315,142
------------
$162,711,950
============
NET ASSETS
Net Assets consist of:
Capital paid in......................................... $156,446,786
Undistributed net investment income..................... 53,292
Accumulated net realized losses......................... (341,858)
Unrealized appreciation on investments and foreign
currency............................................... 6,553,730
------------
NET ASSETS............................................... $162,711,950
============
Computation of offering price:
Net asset value and redemption price per share
($162,711,950 divided by 1,497,241 shares of beneficial
interest)............................................... $ 108.67
============
Identified cost of investments........................... $153,291,110
============
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.............................................. $11,118,852
-----------
11,118,852
EXPENSES
Management fees....................................... $ 572,279
Trustees' fees and expenses........................... 32,681
Custodian............................................. 77,692
Audit and tax services................................ 15,100
Legal................................................. 10,175
Printing.............................................. 69,031
Registration.......................................... 7
Miscellaneous......................................... 6,494
----------
Total expenses....................................... 783,459
-----------
NET INVESTMENT INCOME.................................. 10,335,393
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, AND
FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments--net...................................... 1,968,574
Foreign currency transactions--net (408,762)
----------
Total realized gain on
investments and foreign currency transactions....... 1,559,812
----------
Unrealized appreciation on:
Investments--net...................................... 15,388,967
Foreign currency transactions--net.................... 3,212
----------
Total unrealized appreciation on investments and
foreign currency transactions....................... 15,392,179
----------
Net gain on investment transactions.................... 16,951,991
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............. $27,287,384
===========
</TABLE>
See accompanying notes to financial statements.
75
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 8,708,335 $ 10,335,393
Net realized gain (loss) on investments and for-
eign currency transactions....................... (2,245,611) 1,559,812
Unrealized appreciation (depreciation) on invest-
ments, and foreign currency transactions......... (10,925,944) 15,392,179
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. (4,463,220) 27,287,384
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (8,697,370) (9,888,438)
In excess of net investment income................ (6,472) 0
------------ ------------
(8,703,842) (9,888,438)
------------ ------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares...................... 50,909,294 46,886,957
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income.......... 8,703,842 9,888,437
------------ ------------
59,613,136 56,775,394
Cost of shares redeemed........................... (51,454,492) (37,696,007)
------------ ------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE
TRANSACTIONS..................................... 8,158,644 19,079,387
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... (5,008,418) 36,478,333
NET ASSETS
Beginning of the year............................. 131,242,035 126,233,617
------------ ------------
End of the year................................... $126,233,617 $162,711,950
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year............................. $ 0 $ 0
============ ============
End of the year................................... $ 0 $ 53,292
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 493,361 440,564
Issued in connection with the reinvestment of:
Distributions from net investment income.......... 90,987 91,832
------------ ------------
584,348 532,396
Redeemed.......................................... (499,476) (356,518)
------------ ------------
Net change........................................ 84,872 175,878
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1991 1992 1993 1994 1995
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year.......................... $ 97.61 $103.44 $ 103.47 $ 106.14 $ 95.53
------- ------- -------- -------- --------
Income From Investment Opera-
tions
Net Investment Income......... 8.53 7.96 5.70 7.05 7.34
Net Realized and Unrealized
Gain (Loss) on Investments... 8.90 0.51 7.38 (10.61) 12.85
------- ------- -------- -------- --------
Total From Investment Opera-
tions........................ 17.43 8.47 13.08 (3.56) 20.19
------- ------- -------- -------- --------
Less Distributions
Distributions From Net Invest-
ment Income.................. (9.47) (6.87) (6.20) (7.05) (7.05)
Distributions In Excess of Net
Investment Income............ 0.00 0.00 (0.05) 0.00 0.00
Distributions From Net Real-
ized Capital Gains........... (2.13) (1.57) (4.16) 0.00 0.00
------- ------- -------- -------- --------
Total Distributions........... (11.60) (8.44) (10.41) (7.05) (7.05)
------- ------- -------- -------- --------
Net Asset Value, End of Year... $103.44 $103.47 $ 106.14 $ 95.53 $ 108.67
======= ======= ======== ======== ========
TOTAL RETURN (%)............... 17.96 8.18 12.61 (3.36) 21.20
Ratio of Operating Expenses to
Average Net Assets (%)........ 0.45 0.44 0.43 0.44 0.55
Ratio of Net Investment Income
to Average Net Assets (%)..... 8.27 7.70 6.47 6.75 7.22
Portfolio Turnover Rate (%).... 193 71 177 82 73
Net Assets, End of Year (000).. $49,369 $83,057 $131,242 $126,234 $162,712
</TABLE>
As of January 1, 1993, the Bond Income Series discontinued the use of
equalization accounting.
See accompanying notes to financial statements.
76
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROS. U.S. GOVERNMENT SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
BONDS & NOTES--92.0% OF TOTAL NET ASSETS SHORT-TERM INVESTMENTS--17.4%
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
FEDERAL AGENCY--60.9%
$ 250,000 Federal Home Loan Banks
6.49%, 9/08/97.......................................... $ 254,867
300,000 Federal Home Loan Banks
5.94%, 6/13/00.......................................... 304,188
391,841 Federal Home Loan Mortgage
6.00%, 10/01/10......................................... 388,291
363,770 Federal Home Loan Mortgage
6.00%, 2/15/13.......................................... 362,977
1,999,998 Federal National Mortgage Association
6.50%, 12/01/10......................................... 2,012,498
132,095 Federal National Mortgage Association
11.50%, 02/01/20........................................ 148,648
450,000 Federal National Mortgage Association
Pool TBA
6.50%, 10/01/25......................................... 444,515
350,000 Government National Mortgage Association TBA
7.00%, 12/15/24......................................... 353,937
300,000 Student Loan Marketing Association
7.50%, 3/08/00.......................................... 321,537
----------
4,591,458
----------
U.S. TREASURY--31.1%
350,000 U.S. Treasury Bond
8.875%, 8/15/17......................................... 468,857
600,000 U.S. Treasury Notes
7.75%, 1/31/00.......................................... 652,350
200,000 U.S. Treasury Notes
6.75%, 4/30/00.......................................... 210,590
1,000,000 U.S. Treasury Notes
5.75%, 10/31/00......................................... 1,015,470
----------
2,347,267
----------
Total Bonds & Notes
(Identified Cost $6,744,361)............................ 6,938,725
----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE (A)
<C> <S> <C>
$1,314,000 Repurchase agreement with State Street Bank & Trust
Company dated 12/29/95 at 5.75% to be repurchased at
$1,314,840 on 1/2/96 collateralized by 1,335,000
U.S. Treasury Note 5.125% due 4/30/98 with a value
of $1,324,854....................................... $1,314,000
----------
Total Short-Term Investments
(Identified Cost $1,314,000)........................ 1,314,000
----------
Total Investments--109.4%
(Identified Cost $8,058,361)(b)..................... 8,252,725
Cash and Receivables................................. 110,456
Liabilities.......................................... (821,145)
----------
TOTAL NET ASSETS--100%............................... $7,542,036
==========
(a) See Note 1a.
(b) Federal Tax Information:
At December 31, 1995 the net unrealized appreciation on investments based on
cost of $8,059,236 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all in-
vestments in which there is an excess of value over
tax cost............................................ $ 194,439
Aggregate gross unrealized depreciation for all in-
vestments in which there is an excess of tax cost
over value.......................................... (950)
----------
Net unrealized appreciation.......................... $ 193,489
==========
</TABLE>
See accompanying notes to financial statements.
78
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS U.S. GOVERNMENT SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value:
Securities................................................ $6,938,725
Repurchase Agreements..................................... 1,314,000
----------
Total Investments........................................ 8,252,725
Cash...................................................... 343
Receivable for:
Fund shares sold.......................................... 12,653
Accrued interest.......................................... 74,392
Due from advisor.......................................... 15,361
Unamortized organization expense.......................... 7,707
----------
8,363,181
LIABILITIES
Payable for:
Securities purchased...................................... $795,977
Fund shares redeemed...................................... 54
Accrued expenses:
Management fees........................................... 1,365
Other expenses............................................ 23,749
--------
821,145
----------
$7,542,036
==========
NET ASSETS
Net Assets consist of:
Capital paid in........................................... $7,332,248
Undistributed net investment income....................... 735
Accumulated net realized gains............................ 14,689
Unrealized appreciation on
investments.............................................. 194,364
----------
NET ASSETS................................................. $7,542,036
==========
Computation of offering price:
Net asset value and redemption price per share ($7,542,036
divided by 683,462 shares of beneficial interest)......... $ 11.04
==========
Identified cost of investments............................. $8,058,361
==========
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest................................................... $240,412
--------
240,412
EXPENSES
Management fees............................................ $ 20,446
Trustees' fees and expenses................................ 15,049
Custodian.................................................. 39,052
Audit and tax services..................................... 19,700
Legal...................................................... 10,824
Printing................................................... 843
Registration............................................... 7
Insurance.................................................. 29
Amortization of organization expenses...................... 2,345
Miscellaneous.............................................. 2,351
--------
Total expenses............................................ 110,646
Less expenses assumed by the investment adviser........... (84,623) 26,023
-------- --------
NET INVESTMENT INCOME....................................... 214,389
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments--net.......................... 71,273
Unrealized appreciation on investments--net................ 195,460
--------
Net gain on investment transactions......................... 266,733
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $481,122
========
</TABLE>
See accompanying notes to financial statements.
79
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS U.S. GOVERNMENT SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 31, 1994 (A)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
-------------------- ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income...................... $ 19,034 $ 214,389
Net realized gain (loss) on investments.... (6,247) 71,273
Unrealized appreciation (depreciation) on
investments............................... (1,096) 195,460
---------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS..... 11,691 481,122
---------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income...................... (19,034) (214,389)
In excess of net investment income......... (966) (1,001)
Net realized gain on investments........... 0 (50,946)
---------- -----------
(20,000) (266,336)
---------- -----------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares............... 1,051,370 7,348,256
Net asset value of shares issued in connec-
tion with the reinvestment of:
Distributions from net investment income... 20,000 215,390
Distributions from net realized gain....... 0 50,946
---------- -----------
1,071,370 7,614,592
Cost of shares redeemed.................... (1,051,370) (2,299,033)
---------- -----------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS........................ 20,000 5,315,559
---------- -----------
TOTAL INCREASE IN NET ASSETS............... 11,691 5,530,345
NET ASSETS
Beginning of the year...................... 2,000,000 2,011,691
---------- -----------
End of the year............................ $2,011,691 $ 7,542,036
========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the year...................... $ 0 $ 0
========== ===========
End of the year............................ $ 0 $ 735
========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares............. 111,982 671,863
Issued in connection with the reinvestment
of:
Distributions from net investment income... 2,008 19,652
Distributions from net realized gain....... 0 4,648
---------- -----------
113,990 696,163
Redeemed................................... (111,982) (214,709)
---------- -----------
Net change................................. 2,008 481,454
========== ===========
(a) Commencement of Operations
FINANCIAL HIGHLIGHTS
<CAPTION>
OCTOBER 31, 1994*
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
-------------------- ------------
<S> <C> <C>
Net Asset Value, Beginning of Year.......... $ 10.00 $ 9.96
---------- -----------
Income From Investment Operations
Net Investment Income...................... 0.10 0.33
Net Realized and Unrealized Gain (Loss) on
Investments............................... (0.04) 1.16
---------- -----------
Total From Investment Operations........... 0.06 1.49
---------- -----------
Less Distributions
Distributions From Net Investment Income... (0.10) (0.33)
Distributions From Net Realized Capital
Gains..................................... 0.00 (0.08)
---------- -----------
Total Distributions........................ (0.10) (0.41)
---------- -----------
Net Asset Value, End of Year................ $ 9.96 $ 11.04
========== ===========
TOTAL RETURN (%)............................ 0.60*** 15.02
Ratio of Operating Expenses to Average Net
Assets (%)................................. 0.70** 0.70
Ratio of Net Investment Income to Average
Net Assets (%)............................. 5.70** 5.62
Portfolio Turnover Rate (%)................. 1,409** 415
Net Assets, End of Year (000)............... $ 2,012 $ 7,542
The ratios of expenses to average net assets
without giving effect to the voluntary ex-
pense limitations described in Note 4 to
the Financial Statements would have been
(%)........................................ 2.54** 2.90
</TABLE>
* Commencement of operations.
** Computed on an annualized basis.
*** Not computed on an annualized basis.
See accompanying notes to financial statements.
80
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISERS MONEY MARKET SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
INVESTMENTS--98.7% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE INTEREST MATURITY
VALUE DESCRIPTION RATE DATE VALUE (A)
<C> <S> <C> <C> <C>
BANKERS ACCEPTANCE--1.1%
$1,000,000 Bank of Montreal................... 5.500% 04/18/96 $ 983,500
-----------
Total Bankers Acceptance
($983,500)......................... 983,500
-----------
CERTIFICATE OF DEPOSIT--11.1%
1,000,000 Societe Generale New York.......... 5.730% 01/16/96 999,966
1,000,000 Societe Generale New York.......... 5.670% 01/31/96 999,902
1,000,000 Banque Nationale de Paris.......... 5.780% 02/05/96 1,000,025
1,000,000 Banque Nationale de Paris.......... 5.840% 02/26/96 1,000,127
1,000,000 Radobank Nederland................. 6.660% 02/27/96 999,701
1,000,000 Royal Bank of Canada............... 5.735% 03/13/96 1,000,068
1,000,000 Radobank Nederland................. 5.780% 04/05/96 1,000,058
2,000,000 Union Bank of Switzerland.......... 5.530% 06/17/96 2,000,068
1,000,000 CIBC Yankee CD..................... 5.595% 10/23/96 1,000,000
-----------
9,999,915
-----------
Total Certificate of Deposit
($9,999,915)....................... 9,999,915
-----------
CERTIFICATE OF DEPOSIT-EURO
DOLLAR--1.1%
1,000,000 ABN Amro Euro...................... 5.630% 05/14/96 1,000,063
-----------
Total Certificate of Deposit Euro-
Dollar ($1,000,063)................ 1,000,063
-----------
COMMERCIAL PAPER--85.4%
AUTOMOTIVE--8.6%
1,000,000 General Motors Acceptance Corp..... 5.750% 01/03/96 999,681
1,400,000 General Motors Acceptance Corp..... 5.750% 01/09/96 1,398,211
1,300,000 Ford Motor Credit Corp............. 5.690% 01/12/96 1,297,740
1,000,000 Ford Motor Credit Corp............. 6.050% 01/12/96 998,151
500,000 General Motors Acceptance Corp..... 5.800% 01/22/96 498,308
1,100,000 General Motors Acceptance Corp..... 5.790% 01/25/96 1,095,754
1,445,000 Ford Motor Credit Corp. ........... 5.600% 03/06/96 1,430,389
-----------
7,718,234
-----------
BANKING--14.4%
1,000,000 UBS Finance Delaware, Inc.......... 5.850% 01/02/96 999,837
1,000,000 Dredsner US Finance................ 5.820% 01/04/96 999,515
600,000 Commerzbank US Finance............. 5.950% 01/08/96 599,306
1,500,000 Commerzbank US Finance............. 5.800% 01/11/96 1,497,583
1,000,000 Commerzbank US Finance............. 5.700% 01/12/96 998,258
1,045,000 Toronto Dominion Holdings.......... 5.690% 01/23/96 1,041,366
1,000,000 Morgan Stanley Securities.......... 5.700% 02/12/96 993,350
1,000,000 Norwest Corp....................... 5.670% 02/23/96 991,652
1,000,000 J.P Morgan Securities.............. 5.580% 03/05/96 990,080
900,000 Commerzbank US Finance............. 5.570% 03/15/96 889,695
1,000,000 ABN Amro North..................... 5.550% 04/29/96 981,654
1,000,000 Dredsner US Finance................ 5.440% 05/16/96 979,449
1,000,000 Morgan Guaranty Trust.............. 6.050% 08/21/96 1,000,000
-----------
12,961,745
-----------
DRUGS--2.2%
1,000,000 American Home Products Corp........ 5.720% 02/02/96 994,916
1,000,000 American Home Products Corp........ 5.720% 02/08/96 993,962
-----------
1,988,878
-----------
</TABLE>
See accompanying notes to financial statements.
82
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
INVESTMENTS--(CONTINUED)
<TABLE>
<CAPTION>
FACE INTEREST MATURITY
VALUE DESCRIPTION RATE DATE VALUE (A)
<C> <S> <C> <C> <C>
FINANCE--26.5%
$1,000,000 Transamerica Finance Group......... 5.700% 01/05/96 $ 999,367
500,000 Transamerica Finance Group......... 5.640% 01/12/96 499,138
1,000,000 General Electric Capital Corp...... 5.600% 01/16/96 997,667
1,000,000 Household Finance.................. 5.720% 01/19/96 997,140
900,000 Avco Financial Services............ 5.700% 01/22/96 897,007
1,230,000 Beneficial Corp.................... 5.620% 01/23/96 1,225,776
1,180,000 Avco Financial Services............ 5.730% 01/25/96 1,175,492
1,000,000 CIT Group Holdings................. 5.700% 01/30/96 995,408
1,415,000 Beneficial Corp.................... 5.620% 02/01/96 1,408,152
1,500,000 Transamerica Finance Group......... 5.570% 02/15/96 1,489,556
Associates Corporation North
1,250,000 America............................ 5.650% 02/16/96 1,240,976
1,000,000 Avco Financial Services............ 5.670% 02/20/96 992,125
Associates Corporation North
1,000,000 America............................ 5.690% 02/28/96 990,833
1,000,000 General Electric Capital Corp...... 5.560% 03/08/96 989,652
1,000,000 American Express................... 5.640% 03/13/96 988,720
1,100,000 Beneficial Corporation............. 5.550% 03/18/96 1,086,942
1,615,000 International Lease Finance........ 5.550% 03/29/96 1,593,090
700,000 American Express................... 5.550% 04/03/96 689,964
975,000 Transamerica Finance Group......... 5.530% 04/04/96 960,922
1,110,000 CIT Group Holdings................. 5.560% 04/12/96 1,092,514
400,000 American Express................... 5.550% 04/26/96 392,847
1,000,000 American Express................... 5.590% 05/06/96 980,435
1,100,000 General Electric Capital Corp...... 5.550% 06/28/96 1,069,645
150,000 American Express................... 5.360% 07/02/96 145,913
-----------
23,899,281
-----------
FOOD & TOBACCO--3.3%
500,000 Philip Morris Companies, Inc....... 5.850% 01/03/96 499,837
1,000,000 Pepsico, Inc....................... 5.280% 09/03/96 963,920
500,000 Coca Cola Co. ..................... 6.050% 01/11/96 499,160
1,000,000 Coca Cola Co. ..................... 6.100% 01/11/96 998,306
-----------
2,961,223
-----------
FORESTRY--0.5%
490,000 Weyerhaeuser NTG................... 5.800% 01/08/96 489,447
-----------
INSURANCE--4.1%
500,000 Prudential Funding Corp............ 5.920% 01/02/96 499,918
780,000 Prudential Funding Corp. .......... 5.750% 01/04/96 779,626
1,225,000 Prudential Funding Corp............ 5.780% 01/08/96 1,223,623
1,160,000 Prudential Funding Corp. .......... 5.790% 01/18/96 1,156,828
-----------
3,659,995
-----------
MANAGEMENT SERVICE--1.1%
1,000,000 PHH Corp........................... 5.740% 01/19/96 997,130
-----------
MULTI-SERVICE--1.1%
1,000,000 Hanson Finance..................... 5.640% 02/23/96 991,697
-----------
</TABLE>
See accompanying notes to financial statements.
83
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
INVESTMENTS AS OF DECEMBER 31, 1995
INVESTMENTS--(CONTINUED)
<TABLE>
<CAPTION>
FACE INTEREST MATURITY
VALUE DESCRIPTION RATE DATE VALUE (A)
<C> <S> <C> <C> <C>
POLLUTION CONTROL--3.7%
$1,100,000 WMX Technologies, Inc. ............ 5.700% 02/27/96 $ 1,090,072
1,000,000 WMX Technologies, Inc. ............ 5.500% 06/04/96 976,319
1,270,000 WMX Technologies, Inc. ............ 5.340% 08/16/96 1,227,049
-----------
3,293,440
-----------
RETAIL--4.3%
370,000 Sears Roebuck Acceptance Corp. .... 5.780% 01/17/96 369,050
760,000 Sears Roebuck Acceptance Corp. .... 5.680% 01/18/96 757,962
1,000,000 Sears Roebuck Acceptance Corp. .... 5.770% 01/24/96 996,314
1,785,000 Sears Roebuck Acceptance Corp. .... 5.810% 01/29/96 1,776,934
-----------
3,900,260
-----------
SECURITIES--11.8%
1,180,000 Smith Barney, Inc.................. 5.800% 01/09/96 1,178,479
1,385,000 Merrill Lynch, Inc................. 5.720% 01/10/96 1,383,019
1,030,000 Merrill Lynch, Inc................. 5.720% 01/17/96 1,027,382
520,000 Smith Barney, Inc.................. 5.750% 01/24/96 518,090
1,000,000 Smith Barney, Inc.................. 5.720% 01/26/96 996,028
600,000 Merrill Lynch, Inc................. 5.710% 02/09/96 596,288
1,000,000 Merrill Lynch, Inc................. 5.600% 02/23/96 991,756
1,200,000 Goldman Sachs Group................ 5.550% 03/22/96 1,185,015
2,000,000 Goldman Sachs Group................ 5.600% 04/09/96 1,969,200
800,000 Goldman Sachs Group................ 5.500% 05/07/96 784,478
-----------
10,629,735
-----------
UTILITY--3.8%
3,000,000 Michigan Consolidated Gas.......... 5.680% 02/06/96 2,982,960
485,000 Michigan Consolidated Gas.......... 5.650% 02/07/96 482,184
-----------
3,465,144
-----------
Total Commercial Paper
(Cost $76,956,209)................ 76,956,209
-----------
Total Investments--98.7%
(Cost $88,939,687)(b)............. 88,939,687
Cash and Receivables............... 1,999,602
Liabilities........................ (791,130)
-----------
TOTAL NET ASSETS--100%............. $90,148,159
===========
</TABLE>
(a) See Note 1A.
(b) The aggregate cost for federal income tax purposes was $88,939,687
See accompanying notes to financial statements.
84
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value..................................... $88,939,687
Cash..................................................... 5,185
Receivable for:
Fund shares sold......................................... 1,786,132
Accrued interest......................................... 208,285
-----------
90,939,289
LIABILITIES
Payable for:
Fund shares redeemed..................................... $285,178
Dividends declared....................................... 384,224
Accrued expenses:
Management fees.......................................... 56,834
Deferred trustees' fees.................................. 28,188
Other expenses........................................... 36,706
--------
791,130
-----------
$90,148,159
===========
NET ASSETS
Net Assets consist of:
Capital paid in.......................................... $90,148,159
-----------
NET ASSETS................................................ $90,148,159
===========
Computation of offering price:
Net asset value and redemption price per share
($90,148,159 divided by 901,482 shares of beneficial
interest)................................................ $ 100.00
===========
Cost of investments....................................... $88,939,687
===========
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest................................................. $4,800,248
----------
4,800,248
EXPENSES
Management fees.......................................... $278,007
Trustees' fees and expenses.............................. 25,255
Custodian................................................ 49,932
Audit and tax services................................... 10,400
Legal.................................................... 7,727
Printing................................................. 27,004
Registration............................................. 7
Miscellaneous............................................ 7,353
--------
Total expenses........................................... 405,685
Less expenses assumed by the
investment adviser...................................... (8,532) 397,153
-------- ----------
NET INVESTMENT INCOME..................................... 4,403,095
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS................ $4,403,095
==========
</TABLE>
See accompanying notes to financial statements.
85
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income........................... $ 2,614,216 $ 4,403,095
------------- -------------
Increase in net assets from operations.......... 2,614,216 4,403,095
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income........................... (2,614,206) (4,403,095)
------------- -------------
(2,614,206) (4,403,095)
------------- -------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from sale of shares.................... 149,478,320 141,012,985
Net asset value of shares issued in connection
with the reinvestment of:
Distributions from net investment income........ 2,445,979 4,331,085
------------- -------------
151,924,299 145,344,070
Cost of shares redeemed......................... (137,007,701) (129,156,304)
------------- -------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS............................. 14,916,598 16,187,766
------------- -------------
TOTAL INCREASE IN NET ASSETS.................... 14,916,598 16,187,766
NET ASSETS
Beginning of the year........................... 59,043,795 73,960,393
------------- -------------
End of the year................................. $ 73,960,393 $ 90,148,159
============= =============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................. 1,494,783 1,410,130
Issued in connection with the reinvestment of:
Distributions from net investment income........ 24,460 43,311
------------- -------------
1,519,243 1,453,441
Redeemed........................................ (1,370,077) (1,291,563)
------------- -------------
Net change...................................... 149,166 161,878
============= =============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of
year............................. $100.00 $100.00 $100.00 $100.00 $100.00
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income............ 6.03 3.73 2.93 3.89 5.50
------- ------- ------- ------- -------
Total from Investment Operations. 6.03 3.73 2.93 3.89 5.50
Distributions from net investment
income.......................... (6.03) (3.73) (2.93) (3.89) (5.50)
------- ------- ------- ------- -------
Total Distribution............... (6.03) (3.73) (2.93) (3.89) (5.50)
------- ------- ------- ------- -------
Net asset value at end of year.... $100.00 $100.00 $100.00 $100.00 $100.00
======= ======= ======= ======= =======
TOTAL RETURN (%).................. 6.20 3.79 2.97 4.01 5.64
Ratio of operating expenses to av-
erage net assets (%)............. 0.38 0.38 0.38 0.40 0.50
Ratio of net investment income to
average net assets (%)........... 6.01 3.71 2.93 3.89 5.50
Net Assets, End of Year (000)..... $58,614 $61,607 $59,044 $73,960 $90,148
The ratios of expenses to average
net assets without giving effect
to the voluntary expense
limitations described in Note 4
to the Financial Statements would
have been (%).................... -- -- -- -- 0.51
</TABLE>
See accompanying notes to financial statements.
86
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1995
1. New England Zenith Fund (the "Fund") is organized as a Massachusetts
business trust under the laws of the Commonwealth of Massachusetts pursuant to
an Agreement and Declaration of Trust dated December 16, 1986. The Fund
succeeded to the operations of The New England Zenith Fund, Inc. on February
27, 1987. The Fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company.
Shares in the Fund are not offered directly to the general public and,
currently, are available only to separate accounts established by New England
Variable Life Insurance Company ("NEVLICO"), New England Mutual Life Insurance
Company ("The New England") or its subsidiaries as an investment vehicle for
variable life insurance or variable annuity products, although not all Series
may be available to all separate accounts. In the future, however, such shares
may be offered to separate accounts of insurance companies unaffiliated with
NEVLICO or The New England.
The Fund's Agreement and Declaration of Trust permits the issuance of an
unlimited number of shares of beneficial interest, no par value, in separate
Series, with shares of each Series representing interests in a separate
portfolio of assets. Each Series is separately managed and has its own
investment objective and policies. The Fund (or its predecessor) began
offering shares of the Series on the dates set forth below:
<TABLE>
<S> <C>
Bond Income............. August 26, 1983
Capital Growth.......... August 26, 1983
Money Market............ August 26, 1983
Stock Index............. March 30, 1987
Managed................. May 1, 1987
Avanti Growth........... April 30, 1993
Value Growth............ April 30, 1993
</TABLE>
<TABLE>
<S> <C>
Small Cap................ May 1, 1994
Balanced Series.......... October 31, 1994
International Equity Se-
ries.................... October 31, 1994
U.S. Government Series... October 31, 1994
Strategic Bond Opportuni-
ties Series............. October 31, 1994
Venture Value Series..... October 31, 1994
Equity Growth Series..... October 31, 1994
</TABLE>
The following is a summary of significant accounting policies followed by the
Fund in the preparation of the Financial Statements of the Series. The
policies are in conformity with generally accepted accounting principles for
investment companies. The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. SECURITY VALUATION
MONEY MARKET SERIES--The Money Market Series employs the amortized cost
method of security valuation which, in the opinion of the Board of
Trustees, represents the fair market value of the particular security. The
Board monitors the deviations between the Series' net asset value per
share, as determined by using available market quotations, and its
amortized cost price per share. If the deviation exceeds 1/2 of 1%, the
board will consider what action, if any, should be initiated to provide
fair valuation of the Series.
BOND INCOME, MANAGED, BALANCED, U.S. GOVERNMENT AND STRATEGIC BOND
OPPORTUNITIES SERIES--Debt securities (other than short-term obligations)
are valued on the basis of valuations furnished by a pricing service,
authorized by the Board of Trustees, which service determines valuations
for normal, institutional-size trading units of such securities using
market information, transactions for comparable securities and various
relationships between securities which are generally recognized by
institutional traders. Short-term notes are stated at amortized cost which
approximates market value.
CAPITAL GROWTH, MANAGED, STOCK INDEX, AVANTI GROWTH, VALUE GROWTH, SMALL
CAP, BALANCED, INTERNATIONAL EQUITY, VENTURE VALUE AND EQUITY GROWTH
SERIES--Equity securities are valued on the basis of market valuations
furnished by a pricing service, authorized by the Board of Trustees. The
pricing service provides the last reported sale price for securities listed
on a national securities exchange or on the NASDAQ National Market System,
or if there is no reported sale during the day, and in the case of over-
the-counter securities not so listed, the last bid price. Securities for
which current market quotations are not readily available are taken at fair
value as determined in good faith by the Board of
87
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1995--(CONTINUED)
Trustees, although the actual calculations may be made by persons acting
pursuant to the direction of the Board. Short-term notes are stated at
amortized cost which approximates market value.
B. FOREIGN CURRENCY TRANSLATION--The books and records of the funds are
maintained in U.S. dollars. The value of securities, currencies and other
assets and liabilities denominated in currencies other than U.S. dollars
are translated into U.S. dollars based upon foreign exchange rates
prevailing at the end of the period. Purchases and sales of investment
securities, income and expenses are translated on the respective dates of
such transactions.
Since the values of investment securities are presented at the foreign
exchange rates prevailing at the end of the period, it is not practical to
isolate that portion of the results of operations arising from changes in
exchange rates from fluctuations arising from changes in market prices of
the investment securities.
Net realized and unrealized gains and losses on foreign currency
transactions represent foreign exchange gains from the sale of short-term
securities and holdings of foreign currencies, foreign currency gains and
losses between trade dates and settlement dates on investment securities
transactions, and the difference between the amounts of daily interest
accruals on the books of the fund and the amounts actually received
resulting from changes in exchange rates on the payable date.
FORWARD FOREIGN CURRENCY CONTRACTS. The Fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. These contracts
involve market risk in excess of the unrealized gain or loss reflected in
the Fund's Statement of Assets and Liabilities. The U.S. dollar value of
the currencies the Fund has committed to buy or sell is shown in the
schedule of investments under the caption "Forward Foreign Currency
Contracts." This amount represents the aggregate exposure to each currency
the Fund has acquired or hedged through currency contracts at period end.
Losses may arise from changes in the value of the foreign currency or if
the counterparties do not perform under the contracts terms. The U.S.
dollar value of forward foreign currency contracts is determined using
forward currency exchange rates supplied by a quotation service.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME--Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Dividend income is recorded on the ex-dividend date and interest
income is recorded on the accrual basis. In determining gain or loss on
securities sold, the cost of securities has been determined on the
identified cost basis.
D. FUTURES CONTRACTS--The Value Growth, Stock Index, Managed, Balanced,
International Equity, U.S. Government, Strategic Bond Opportunities and
Venture Value Series may enter into futures contracts on the S&P 500 Index
or on interest-bearing securities or indices thereof, or on indices of
stock prices to hedge against changes in the values of securities the
Series owns or expects to purchase. Upon entering into a futures contract,
the Series is required to deposit with a broker an amount ("initial
margin") equal to a certain percentage of the purchase price indicated in
the futures contract. Subsequent payments ("variation margin") are made or
received by the Series each day, dependent on the daily fluctuations in the
value of the underlying security, and are recorded for financial reporting
purposes as unrealized gains or losses by the Series. When entering into a
closing transaction, the Series will realize, for book purposes, a gain or
loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy. Futures contracts are valued at the
most recent settlement price, unless such price does not reflect the fair
market value of the contract, in which case the position will be valued by
or under the direction of the Trustees. Certain risks may arise upon
entering into futures contracts from the contingency of imperfect market
conditions. The potential risk to the fund is that the change in value of
futures contracts primarily corresponds with the value of underlying
instruments which may not correspond to the change in the value of the
hedged instruments. In addition, there is a risk that the fund may not be
able to close out its futures positions due to an illiquid secondary
market.
E. REPURCHASE AGREEMENTS--The Series, through their custodian, receive
delivery of the underlying securities collateralizing repurchase
agreements. It is the Series' policy that the market value of the
collateral be at least equal to 100% of the repurchase price. The adviser
is responsible for determining that the value of the collateral is at all
times at least equal to the repurchase price. In connection with
transactions in repurchase agreements, if the seller defaults and the value
of the collateral declines or if the seller enters an insolvency
proceeding, realization of the collateral by the Series may be delayed or
limited.
88
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1995--(CONTINUED)
F. SHORT SALES AGAINST THE BOX--The Equity Growth Series may hedge the
investments against changes in value by engaging in short sales against the
box. In a short sale against the box, the fund sells a borrowed security,
while at the same time either owning an identical security or having the
right to obtain such a security. By selling short against the box the
equity underlying one of its convertible holdings, the fund would seek to
offset the effect that a decline in the underlying equity might have on the
value of the convertible security. While the short sale is outstanding, the
fund will not dispose of the security hedged by the short sale. The fund is
required to establish a margin account with the broker lending the security
sold short. While the short sale is outstanding, the broker retains the
proceeds of the short sale and the fund instructs the custodian to maintain
in a separate account securities having a value at least equal to the
amount of the securities sold short. The Fund had no such transaction
during the year ended.
G. FEDERAL TAXES--Each Series, which is a separate taxable entity, intends to
meet the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute to its shareholders all of its
taxable income and any net realized capital gains at least annually.
Accordingly, no provision for federal income tax has been made.
H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--Money Market Series dividends
are declared daily to shareholders of record at the time and are paid
monthly. Dividends and distributions are recorded by all other Series on
the ex-dividend date. Net realized gains from security transactions are
distributed at least annually to shareholders. The timing and
characterization of certain income and capital gains distributions are
determined in accordance with federal tax regulations which may differ from
generally accepted accounting principles. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassification to paid in capital. These differences primarily relate to
tax equalization, investments in mortgage back securities and investments
in foreign securities.
I. OTHER--The Money Market Series invests primarily in a portfolio of money
market instruments maturing in 397 days or less whose ratings are within
the two highest ratings categories by a nationally recognized rating agency
or, if not rated, are believed to be of comparable quality. The weighted
average maturity of the Series is less than ninety days. The ability of the
issuers of the securities held by the Series to meet their obligations may
be affected by foreign economic, political and legal developments in the
case of foreign banks or of foreign branches or subsidiaries of U.S. banks
or domestic economic developments in a specific industry, state or region.
2. At December 31, 1995, The New England owned an aggregate of 11 shares of
the fourteen Series and held 12,567,940 shares in separate investment accounts
for annuity contracts offered by The New England. NEVLICO, a life insurance
subsidiary of The New England, held the remaining 5,382,165 shares then
outstanding in separate investment accounts for life insurance and annuity
contracts offered by NEVLICO.
As long as The New England owns (directly or through NEVLICO) more than 25% of
the Fund's outstanding shares, it will be presumed to be in control (as that
term is defined by the Investment Company Act of 1940, as amended) of the
Fund.
3. For the period ended December 31, 1995, purchases and sales of securities
(excluding short-term investments) for each of the Series were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------------ ------------------------------
SERIES OTHER U.S. GOVERNMENT OTHER U.S. GOVERNMENT
------ -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Bond Income............. $ 94,309,538 $18,399,214 $ 86,754,106 $ 6,825,139
Capital Growth.......... 1,948,934,590 -- 1,953,524,593 --
Stock Index............. 10,053,729 -- 2,412,819 --
Managed................. 60,871,228 7,288,867 54,355,580 18,598,516
Avanti Growth........... 35,078,791 -- 20,289,545 --
Value Growth............ 44,182,753 -- 30,305,881 --
Small Cap............... 28,278,054 -- 11,596,456 --
Balanced................ 16,060,167 3,485,704 3,652,680 2,550,154
International Equity.... 20,003,237 -- 7,565,727 --
U.S. Government......... -- 18,429,008 -- 12,951,464
Strategic Bond
Opportunities.......... 9,387,057 4,710,948 5,441,051 4,045,648
Venture Value........... 27,240,060 -- 3,308,605 --
Equity Growth........... 55,032,452 -- 21,154,236 --
</TABLE>
89
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1995--(CONTINUED)
Purchases and sales of corporate short-term obligations for the Money Market
Series aggregated $569,077,546 and $557,178,427, respectively.
Transactions in index futures contracts for the Managed Series for the year
ended December 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
PURCHASES OF FUTURES
CONTRACTS
----------------------
AGGREGATE
NUMBER OF FACE VALUE
CONTRACTS OF CONTRACTS
--------- ------------
<S> <C> <C>
Contracts opened........................................ 20 $ 5,329,000
Contracts closed........................................ (20) (5,329,000)
--- -----------
Open at December 31, 1995............................... 0 $ 0
=== ===========
</TABLE>
4. During the four months ended April 30, 1995, the Fund incurred management
fees payable to the Fund's investment advisers for that period, Back Bay
Advisors, L.P., Capital Growth Management Limited Partnership, Loomis Sayles &
Company, L.P. and Westpeak Investment Advisors, L.P., certain officers and
directors of which are also officers and Trustees of the Fund. Back Bay
Advisors, L.P. and Westpeak Investment Advisors, L.P. are wholly owned
subsidiaries, Loomis Sayles & Company, L.P. is a majority-owned subsidiary and
Capital Growth Management Limited Partnership is a partially owned subsidiary
of New England Investment Companies, L.P., which is a subsidiary of The New
England. Effective May 1, 1995, TNE Advisers, Inc. became the adviser for all
series except Capital Growth with the aforementioned advisers being retained
as the sub-adviser for the respective series. Separate management agreements
for each Series provide for fees as set forth below:
<TABLE>
<CAPTION>
MANAGEMENT
FEES
ANNUAL AVERAGE
FEES SUBADVISER/ PERCENTAGE NET ASSET
SERIES EARNED(A) ADVISER RATE VALUE LEVELS
------ --------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Money Market............ $ 167,334 Back Bay Advisors, L.P./ 0.35% the first $500 million
110,673 TNE Advisers, Inc. 0.30% the next $500 million
0.25% amount in excess of $1 billion
Bond Income............. 389,490 Back Bay Advisors, L.P./ 0.40% the first $400 million
182,789 TNE Advisers, Inc. 0.35% the next $300 million
0.30% the next $300 million
0.25% amounts in excess of $1 billion
Capital Growth.......... 5,232,562 Capital Growth Management 0.70% the first $200 million
Limited Partnership 0.65% the next $300 million
0.60% amounts in excess of $500 million
Stock Index............. 69,084 Westpeak Investment 0.25% All net assets
Advisors, L.P./
53,275 TNE Advisers, Inc.
Managed................. 411,768 Back Bay Advisors, L.P./ 0.50% All net assets
263,970 TNE Advisers, Inc.
Avanti Growth........... 193,740 Loomis Sayles & Company, 0.70% the first $200 million
L.P./ 0.65% the next $300 million
67,146 TNE Advisers, Inc. 0.60% amounts in excess of $500 million
Value Growth............ 181,131 Westpeak Investment 0.70% the first $200 million
Advisors, L.P./ 0.65% the next $300 million
61,497 TNE Advisers, Inc. 0.60% amounts in excess of $500 million
Small Cap............... 88,206 Loomis Sayles & Company, 1.00% All net assets
L.P./
58,898 TNE Advisers, Inc.
</TABLE>
90
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1995--(CONTINUED)
a. Before reduction due to voluntary expense limitation, see below.
- - Pursuant to a voluntary expense agreement, effective from November 1, 1994
to May 1, 1995, relating to the Capital Growth, Back Bay Advisors Money
Market, Back Bay Advisors Bond Income, Back Bay Advisors Managed and the
Westpeak Stock Index Series and, beginning December 1, 1994, relating to the
Loomis Sayles Small Cap, Loomis Sayles Avanti Growth and the Westpeak Value
Growth Series, The New England agreed to bear the expenses (other than the
advisory fees and any brokerage costs, interest, taxes or extraordinary
expenses) of the Series (except the Loomis Sayles Small Cap Series) in excess
of 0.15% of the respective Series' average daily net assets. In the case of
the Loomis Sayles Small Cap Series, The New England agreed to bear such
expenses of the Series in excess of 1.00% of the Series' average daily net
assets. Beginning May 1, 1995, TNE Advisers voluntarily agreed to bear any
such excess expenses for all of the Series.
- - As a result of the Series expenses exceeding the voluntary expense
limitations for the period ending December 31, 1995, The New England and TNE
Advisers assumed expenses of the Series as follows:
<TABLE>
<CAPTION>
EXPENSE WAIVER
DECEMBER 31, 1995
-----------------
<S> <C>
Stock Index............................................ $ 68,581
Avanti Growth.......................................... 77,529
Value Growth........................................... 73,738
Small Cap.............................................. 135,845
Money Market........................................... 8,357
</TABLE>
Prior to November 1, 1994, pursuant to an Expense Agreement between The New
England and the Fund, The New England had agreed to pay the charges and
expenses of preparing, printing and distributing prospectuses and reports to
shareholders, custodial and transfer agent charges and expenses, auditing,
accounting and legal fees and expenses in connection with affairs of the Fund
(except for fees of the independent trustees' outside counsel) and the
expenses of shareholders' and trustees' meetings. In addition, The New England
also paid registration, filing and other fees arising prior to the date the
Fund commenced operations and relating to registration and qualification of
each Series' shares.
TNE Advisers, Inc. is the investment adviser of the Loomis Sayles Balanced
Series, the Draycott International Equity Series, the Salomon Brothers U.S.
Government Series, the Salomon Brothers Strategic Bond Opportunities Series,
the Venture Value Series and the Alger Equity Growth Series and has entered
into subadvisory agreements for these Series with Loomis Sayles, Draycott,
Salomon Brothers Asset Management Inc., Davis Selected Advisers, L.P., and
Fred Alger Management, Inc., respectively.
TNE Advisers, Inc. is paid a management fee from the Series it manages as
shown below. Pursuant to an expense deferral arrangement in effect beginning
November 1, 1994, which TNE Advisers may terminate at any time, TNE Advisers
has agreed to pay operating expenses of the Series in excess of expense limits
stated below subject to the obligation of the Series to repay TNE Advisers
such expenses in future years, if any, when a Series' expenses fall below the
stated expense limit that pertains to that Series; such deferred expenses may
be charged to a Series in a subsequent year to the extent that the charge does
not cause the total expenses in such subsequent year to exceed the Series'
expense limit; provided, however, that no Series is obligated to repay any
expense paid by TNE Advisers more than two years after the end of the fiscal
year in which such expense was incurred.
91
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1995--(CONTINUED)
<TABLE>
<CAPTION>
EXPENSE EXPENSE
MANAGEMENT MANAGEMENT LIMITATION DEFERRAL EXPENSE DEFERRAL
FEES EARNED FEES ANNUAL ANNUAL DECEMBER 31, 1995 DECEMBER 31, 1994
BY TNE PERCENTAGE PERCENTAGE (EXPIRES (EXPIRES
SERIES ADVISERS(A) RATE RATE DECEMBER 31, 1997) DECEMBER 31, 1996)
------ ----------- ----------- ---------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Balanced................ $65,752 0.70% 0.85% $96,085 $ 8,151
International Equity.... 85,666 0.90 1.30 176,796 11,312
U.S. Government......... 20,446 0.55 0.70 84,623 6,163
Strategic Bond
Opportunities.......... 35,085 0.65 0.85 88,120 6,799
Venture Value........... 131,989 0.75 0.90 108,971 9,339
Equity Growth........... 144,943 0.70 0.85 77,254 6,007
</TABLE>
- -------
(a) Before reduction due to voluntary expense deferral.
TNE Advisers, Inc. pays each subadviser at the following rates for providing
advisory services to the Series:
<TABLE>
<CAPTION>
ANNUAL
FEES PERCENTAGE
SUBADVISER SERIES EARNED RATE AVERAGE NET ASSET VALUE LEVELS
---------- ------ ------ ---------- ------------------------------
<S> <C> <C> <C> <C>
Loomis Sayles Balanced $46,966 0.500% the first $25 million
0.400% the next $75 million
0.300% amounts in excess of $100 million
Draycott International Equity $69,461 0.750% the first $10 million
0.600% the next $40 million
0.450% amounts in excess of $50 million
Salomon Brothers U.S. Government $ 8,364 0.225% the first $200 million
0.150% the next $300 million
0.100% amounts in excess of $500 million
Salomon Brothers Strategic Bond Opportunities $18,892 0.350% the first $50 million
0.300% the next $150 million
0.250% the next $300 million
0.200% amounts in excess of $500 million
Davis Selected Venture Value $79,181 0.450% the first $100 million
0.400% the next $400 million
0.350% amounts in excess of $500 million
Alger Equity Growth $87,139 0.450% the first $10 million
0.400% the next $90 million
0.350% the next $150 million
0.300% the next $250 million
0.250% amounts in excess of $500 million
</TABLE>
5. The Fund does not pay any compensation to its officers or to any trustees
who are directors, officers or employees of The New England, NEVLICO, Back Bay
Advisors, L.P., Capital Growth Management Limited Partnership, Loomis Sayles &
Company, L.P., Westpeak Investment Advisors, L.P., New England Funds L.P. or
their affiliates, other than registered investment companies. Each
disinterested trustee is compensated by each Series as follows:
<TABLE>
<CAPTION>
BOND CAPITAL MONEY STOCK AVANTI VALUE SMALL
INCOME GROWTH MARKET INDEX MANAGED GROWTH GROWTH CAP
------ ------- ------ ----- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Retainer......... $2,609 $2,609 $1,739 $870 $2,609 $870 $870 $870
Meeting Fee............. $ 133 $ 133 $ 133 $133 $ 133 $133 $133 $133
Committee Chairman
Annual Retainer
(Contract Review)...... $ 200 $ 200 $ 200 $200 $ 200 $200 $200 $200
Committee Chairman
Annual Retainer
(Audit)................ $ 133 $ 133 $ 133 $133 $ 133 $133 $133 $133
</TABLE>
92
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1995--(CONTINUED)
<TABLE>
<CAPTION>
STRATEGIC
INTERNATIONAL U.S. BOND VENTURE EQUITY
BALANCED EQUITY GOVERNMENT OPPORTUNITIES VALUE GROWTH
-------- ------------- ---------- ------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Annual Retainer......... $870 $870 $870 $870 $870 $870
Meeting Fee............. $133 $133 $133 $133 $133 $133
Committee Chairman
Annual Retainer
(Contract Review)...... $200 $200 $200 $200 $200 $200
Committee Chairman
Annual Retainer
(Audit)................ $133 $133 $133 $133 $133 $133
</TABLE>
In addition to the fees detailed above each of the independent Trustees
received a $5,000 "one time" stipend for their efforts in the restructuring of
the Board.
A deferred compensation plan is available to trustees on a voluntary basis.
Each participating trustee will receive deferred compensation in an amount
equal to the value that such compensation would have had if it had been
invested in the relevant Series on the normal payment date.
6. Shareholder Meeting (unaudited)
At a special shareholders' meeting of the New England Zenith Fund held on
April 10, 1995 shareholders of each Series voted for the following proposals:
1.To fix the number of and elect Trustees:
<TABLE>
<CAPTION>
VOTED VOTED ABSTAINED TOTAL
FOR AGAINST VOTES VOTES
------------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Anne M. Goggin........... 8,318,478.710 162,922.290 8,481,401.000
Nancy Hawthorne.......... 8,317,317.980 164,083.020 8,481,401.000
Joseph M. Hinchey........ 8,320,448.490 160,952.510 8,481,401.000
Richard S. Humphrey,
Jr. .................... 8,306,832.710 174,568.290 8,481,401.000
Robert B. Kittredge...... 8,295,605.600 185,795.400 8,481,401.000
Laurens MacLure.......... 8,298,617.180 182,783.820 8,481,401.000
Dale Rogers Marshall..... 8,317,669.890 163,731.110 8,481,401.000
Joseph F. Turley......... 8,306,762.990 174,638.010 8,481,401.000
Frederick K. Zimmermann.. 8,318,916.500 162,484.500 8,481,401.000
====================================
With respect to the Money
Market Series only:
2. To approve a new
Advisory Agreement
with TNE Advisers;
and.................. 686,974.780 36,750.910 15,211.320 738,937.010
====================================
3. To approve a related
Sub-Advisory
Agreement between TNE
Advisers and Back Bay
Advisors............. 699,471.910 24,251.410 15,213.680 738,937.000
====================================
With respect to the Bond
Income Series only:
4. To approve a new
Advisory Agreement
with TNE Advisers;
and.................. 1,264,059.800 23,078.080 34,815.120 1,321,953.000
====================================
5. To approve a related
Sub-Advisory
Agreement between TNE
Advisers and Back Bay
Advisors............. 1,262,180.600 24,809.760 34,962.650 1,321,953.010
====================================
With respect to the
Managed Series only:
6. To approve a new
Advisory Agreement
with TNE Advisers;
and.................. 887,882.730 12,900.720 23,537.550 924,321.000
====================================
7. To approve a related
Sub-Advisory
Agreement between TNE
Advisers and Back Bay
Advisors............. 879,289.610 20,428.560 24,602.840 924,321.010
====================================
With respect to the
Avanti Growth Series
only:
8. To approve a new
Advisory Agreement
with TNE Advisers;
and.................. 223,300.970 4,143.640 6,415.390 233,860.000
====================================
9. To approve a related
Sub-Advisory
Agreement between TNE
Advisers and Loomis
Sayles............... 222,584.210 4,220.520 7,055.280 233,860.010
====================================
With respect to the Small
Cap Series only:
10. To approve a new
Advisory Agreement
with TNE Advisers;
and.................. 55,887.570 1,688.610 404.820 57,981.000
====================================
11. To approve a related
Sub-Advisory
Agreement between TNE
Advisers and Loomis
Sayles............... 55,867.920 1,688.610 424.460 57,980.990
====================================
</TABLE>
93
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1995--(CONTINUED)
<TABLE>
<CAPTION>
VOTED VOTED ABSTAINED TOTAL
FOR AGAINST VOTES VOTES
----------- --------- ---------- -----------
<S> <C> <C> <C> <C>
With respect to the Value
Growth Series only:
12. To approve a new Advisory
Agreement with TNE
Advisers; and.............. 215,451.990 2,343.680 5,683.330 223,479.000
================================
13. To approve a related Sub-
Advisory Agreement between
TNE Advisers and Westpeak.. 215,149.750 2,500.290 5,828.950 223,478.990
================================
With respect to the Stock Index
Series only:
14. To approve a new Advisory
Agreement with TNE
Advisers; and.............. 482,379.070 8,201.040 11,538.880 502,118.990
================================
15. To approve a related Sub-
Advisory Agreement between
TNE Advisers and Westpeak.. 481,151.770 8,931.960 12,035.270 502,119.000
================================
</TABLE>
At a special shareholders' meeting of the New England Zenith Fund held on
December 28, 1995 shareholders of each Series voted for the following
proposals:
<TABLE>
<S> <C> <C> <C> <C>
1. To approve new
investment advisory
arrangements to be
effective upon the
merger of New
England Mutual Life
Insurance Company
into Metropolitan
Life Insurance
Company, such
arrangements to be
substantially
identical to the
investment advisory
arrangements for the
Series in effect
immediately prior to
such merger.........
<CAPTION>
SERIES
------
<S> <C> <C> <C> <C>
Bond Income............. 1,274,972.493 32,294.664 60,919.253 1,368,186.410
Capital Growth.......... 1,986,307.362 50,506.857 77,297.358 2,114,111.577
Stock Index............. 540,052.225 11,691.922 19,072.809 570,816.956
Money Market............ 788,545.319 43,320.234 38,096.673 869,962.226
Managed................. 831,901.435 11,697.036 29,745.435 873,343.906
Avanti Growth........... 287,934.212 4,669.516 14,668.919 307,272.647
Value Growth............ 288,267.977 3,174.085 10,252.891 301,694.953
Small Cap............... 180,449.675 2,261.222 4,215.528 186,926.425
Balanced................ 1,225,992.533 14,192.604 53,351.529 1,293,536.666
International Equity.... 1,221,859.512 17,625.779 38,712.452 1,278,197.743
U.S. Government......... 514,616.294 11,808.815 22,863.093 549,288.202
Strategic Bond
Opportunities.......... 622,689.667 11,483.159 22,044.017 656,216.843
Venture Value........... 2,024,999.920 28,772.401 67,930.188 2,121,702.509
Equity Growth........... 2,387,211.645 30,962.208 146,194.756 2,564,368.609
=====================================
With respect to the
International Equity
Series only:
2. To approve a new
Sub-Advisory
Agreement for the
Series between TNE
Advisers, Inc. ("TNE
Advisers"), the
Series' current
investment adviser,
and Draycott
Partners, Ltd.
("Draycott"), the
Series' current sub-
adviser, to be
effective upon the
sale of Draycott to
Cursitor Holdings
Ltd. U.K. ("Cursitor
Holdings"); and..... 1,203,510.020 18,030.440 56,657.283 1,278,197.743
=====================================
3. To approve a new
Sub-Advisory
Agreement for the
Series between TNE
Advisers and
Draycott, to be
effective upon the
acquisition of the
business of Cursitor
Holdings by Alliance
Capital Management
L.P. ............... 1,195,720.060 18,030.440 64,447.243 1,278,197.743
=====================================
With respect to the
Equity Growth Series
only:
4. To approve a new
Advisory Agreement
between the Series
and TNE Advisers,
the Series' current
investment adviser,
which would increase
the annual rate of
the advisory fee
payable by the
Series; and......... 2,284,911.674 179,064.985 100,391.951 2,564,368.610
=====================================
5. To approve a related
Sub-Advisory
Agreement between
TNE Advisers and
Fred Alger
Management, Inc.,
the Series' current
sub-adviser......... 2,337,631.370 91,720.864 135,016.376 2,564,368.610
=====================================
</TABLE>
94
<PAGE>
NEW ENGLAND ZENITH FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of New England Zenith Fund:
We have audited the accompanying statements of assets and liabilities of New
England Zenith Fund (comprising, respectively, the Back Bay Advisors Bond
Income Series, Capital Growth Series, Back Bay Advisors Money Market Series,
Westpeak Stock Index Series, Back Bay Advisors Managed Series, Loomis Sayles
Avanti Growth Series, Westpeak Value Growth Series, Loomis Sayles Small Cap
Series, Loomis Sayles Balanced Series, Draycott International Equity Series,
Salomon Brothers U.S. Government Series, Salomon Brothers Strategic Bond
Opportunities Series, Venture Value Series, and Alger Equity Growth Series--
the "Series"), including the schedules of portfolio investments, as of
December 31, 1995, and the related statements of operations, changes in net
assets and financial highlights for the periods indicated herein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Series constituting New England Zenith Fund as of December
31, 1995, the results of their operations, the changes in their net assets,
and the financial highlights for the periods indicated herein, in conformity
with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 7, 1996
95
NEW ENGLAND ZENITH FUND
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: "Financial Highlights" contained
in part A hereof and "Financial Statements and Reports of
Independent Public Accountants" are included in Part B hereof.
(b) Exhibits:
(1)(a) Agreement and Declaration of Trust.*
(b) Amendment No. 1 to Agreement and Declaration of Trust is
incorporated herein by reference to Post-Effective Amendment No.
8 on Form N-1A (File No. 2-83538) filed on April 29, 1987.
(c) Amendment No. 2 to Agreement and Declaration of Trust
is incorporated herein by reference to Post-Effective Amendment
No. 15 on Form N-1A (File No. 2-83538) filed on April 30, 1993.
(d) Form of Amendment No. 3 to Agreement and Declaration of
Trust is incorporated herein by reference to Post-Effective
Amendment No. 17 on Form N-1A (File No. 2-83538) filed on April
29, 1994.
(e) Form of Amendment No. 4 to Agreement and Declaration of
Trust is incorporated herein by reference to Post-Effective
Amendment No. 18 on Form N-1A (File No. 2-83538) filed on August
19, 1994.
(f) Amendment No. 5 to the Agreement and Declaration of
Trust is incorporated herein by reference to Post-Effective
Amendment No. 20 on Form N-1A (File No. 2-83538) filed on May 4,
1995.
(2)(a) By-Laws, as amended.***
(b) Amendment to By-Laws relating to Electronic Proxy
Voting is incorporated herein by reference to Post-Effective
Amendment No. 19 on Form N-1A (File No. 2-83538) filed on March
2, 1995.
(3) None.
(4) None.
(5) (a) Form of Advisory Agreement between the Fund, on
behalf of its Back Bay Advisors Money Market Series, and Back
Bay Advisors, Inc. ("Back Bay Advisors").*
(b) Form of Advisory Agreement between the Fund, on
behalf on its Back Bay Advisors Bond Income Series, and Back Bay
Advisors.*
(c) Form of Advisory Agreement between the Fund, on
behalf of its Back Bay Advisors Managed Series, and Back Bay
Advisors.**
(d) Form of Advisory Agreement between the Fund, on
behalf of its Westpeak Value Growth Series, and Westpeak
Investment Advisors, Inc. is incorporated herein by reference to
Post-Effective Amendment No. 14 on Form N-1A (File No. 2-83538)
filed on February 17, 1993.
(e) Form of Advisory Agreement between the Fund, on
behalf of its Loomis Sayles Avanti Growth Series, and Loomis,
Sayles & Company, Incorporated is incorporated herein by
reference to Post-Effective Amendment No. 14 on Form N-1A (File
No. 2-83538) filed on February 17, 1993.
(f) Advisory Agreement between the Fund, on behalf of
its Capital Growth Series, and Capital Growth Management Limited
Partnership ("CGM") is incorporated herein by reference to Post-
Effective Amendment No. 16 on Form N-1A (File No. 2-83538) filed
on March 2, 1994.
(g) Advisory Agreement between the Fund, on behalf of
its Westpeak Stock Index Series, and Westpeak Investment
Advisors, L.P. ("Westpeak") is incorporated herein by reference
to Post-Effective Amendment No. 16 on Form N-1A (File No. 2-
83538) filed on March 2, 1994.
(h) Form of Advisory Agreement between the Fund, on
behalf of its Loomis Sayles Small Cap Series, and Loomis Sayles &
Co., L.P. ("Loomis Sayles"), is incorporated herein by reference
to Post-Effective Amendment No. 17 on Form N-1A (File No. 2-
83538) filed on April 29, 1994.
(i) Advisory Agreement between the Fund, on behalf of
each of its Loomis Sayles Balanced Series, Draycott International
Equity Series, Salomon Brothers U.S. Government Series, Salomon
Brothers Strategic Bond Opportunities Series, Venture Value
Series, Alger Equity Growth Series and CS First Boston Strategic
Equity Opportunities Series, and TNE Advisers, Inc. is
incorporated herein by reference to Post-Effective Amendment No.
19 on Form N-1A (File No. 2-83538) filed on March 2, 1995.
(j) Form of Sub-Advisory Agreement for each of Loomis
Sayles Balanced Series, Draycott International Equity Series,
Salomon Brothers U.S. Government Series, Salomon Brothers
Strategic Bond Opportunities Series, Venture Value Series, Alger
Equity Growth Series and CS First Boston Strategic Equity
Opportunities Series between TNE Advisers, Inc. and Loomis
Sayles, Draycott Partners, Ltd., Salomon Brothers Asset
Management, Inc., Davis Selected Advisers, L.P., Fred Alger
Management, Inc. and CS First Boston Investment Management
Corporation is incorporated herein by reference to Post-Effective
Amendment No. 18 on Form N-1A (File No. 2-83538) filed on August
19, 1994.
(k) Form of Advisory Agreement between the Fund, on
behalf of each of its Back Bay Advisors Money Market Series, Back
Bay Advisors Bond Income Series, Westpeak Value Growth Series,
Loomis Sayles Avanti Growth Series, Westpeak Stock Index Series,
Back Bay Advisors Managed Series and Loomis Sayles Small Cap
Series and TNE Advisers, Inc. is incorporated herein by reference
to Post-Effective Amendment No. 19 on Form N-1A (File No. 2-
83538) filed on March 2, 1995.
(l) Form of Sub-Advisory Agreement for each of the
Back Bay Advisors Money Market Series, Back Bay Advisors Bond
Income Series, Westpeak Value Growth Series, Loomis Sayles Avanti
Growth Series, Westpeak Stock Index Series, Back Bay Advisors
Managed Series and Loomis Sayles Small Cap Series is
incorporated herein by reference to Post-Effective Amendment No.
19 on Form N-1A (File No. 2-83538) filed on March 2, 1995.
(m) Form of Advisory Agreement between the Fund, on
behalf of its Alger Equity Growth Series, and TNE Advisers, Inc.
is filed herewith.
(n) Form of Sub-Advisory Agreement for the Alger Equity
Growth Series between TNE Advisers, Inc. and Fred Alger
Management, Inc. is filed herewith.
(o) Form of Sub-Advisory Agreement for the Draycott
International Equity Series between TNE Advisers, Inc. and
Draycott Partners, Ltd. is filed herewith.
(p) Form of Sub-Advisory Agreement for the Draycott
International Equity Series between TNE Advisers, Inc. and
Draycott Partners, Ltd. is filed herewith.
(6) (a) Form of Distribution Agreement between the Fund
and New England Securities Corporation, as amended, is
incorporated herein by reference to Post-Effective Amendment No.
14 on Form N-1A (File No. 2-83538) filed on February 17, 1993.
(b) Form of Distribution Agreement between the Fund
and New England Securities Corporation, as amended, is
incorporated herein by reference to Post-Effective Amendment No.
18 on Form N-1A (File No. 2-83538) filed on August 19, 1994.
(7) None.
(8) (a) Amended and Restated Custodian Contract among the
Fund, on behalf of its Back Bay Advisors Money Market, Back Bay
Advisors Bond Income, Capital Growth, Westpeak Stock Index and
Back Bay Advisors Managed Series, New England Mutual Life
Insurance Company ("The New England") and State Street Bank and
Trust Company ("State Street").*
(b) Form of Agreement among the Fund, The New England
and State Street relating to the applicability of the Custodian
Contract to the Westpeak Value Growth and Loomis Sayles Avanti
Growth Series is incorporated herein by reference to Post-
Effective Amendment No. 14 on Form N-1A (File No. 2-83538) filed
on February 17, 1993.
(c) Agreement among the Fund, The New England and
State Street relating to the applicability of the Custodian
Contract to the Loomis Sayles Small Cap Series is incorporated
herein by reference to Post-Effective Amendment No. 17 on Form N-
1A (File No. 2-83538) filed on April 29, 1994.
(d) Form of Agreement among the Fund, The New England
and State Street relating to the applicability of the Custodian
Contract to each of the Loomis Sayles Balanced Series, Draycott
International Equity Series, Salomon Brothers U.S. Government
Series, Salomon Brothers Strategic Bond Opportunities Series,
Venture Value Series, Alger Equity Growth Series and CS First
Boston Strategic Equity Opportunities Series is incorporated
herein by reference to Post-Effective Amendment No. 19 on Form N-
1A (File No. 2-83538) filed on March 2, 1995.
(9) (a) Transfer Agency Agreement between the Fund and The
New England.**
(b) Amendment to Transfer Agency Agreement relating to
the applicability of the Agreement to the Westpeak Value Growth
and the Loomis Sayles Avanti Growth Series is incorporated herein
by reference to Post-Effective Amendment No. 14 on Form N-1A
(File No. 2-83538) filed on February 17, 1993.
(c) Amendment to Transfer Agency Agreement relating to
the applicability of the Agreement to the Loomis Sayles Small Cap
Series is incorporated herein by reference to Post-Effective
Amendment No. 17 on Form N-1A (File No. 2-83538) filed on April
29, 1994.
(d) Form of Amendment to Transfer Agency Agreement
relating to the applicability of the Agreement to each of the
Loomis Sayles Balanced Series, Draycott International Equity
Series, Salomon Brothers U.S. Government Series, Salomon Brothers
Strategic Bond Opportunities Series, Venture Value Series, Alger
Equity Growth Series and CS First Boston Strategic Equity
Opportunities Series is incorporated herein by reference to Post-
Effective Amendment No. 18 on Form N-1A (File No. 2-83538) filed
on August 19, 1994.
(e) Form of Expense Agreement between the Fund and The
New England.*
(f) Powers of Attorney of Trustees are filed herewith.
(g) Form of Service Agreement relating to the Loomis
Sayles Small Cap Series between Loomis Sayles and New England
Funds, L.P., is incorporated herein by reference to Post-
Effective Amendment No. 17 on Form N-1A (File No. 2-83538) filed
on April 29, 1994.
(h) Service Agreement relating to the Westpeak Value
Growth Series and the Westpeak Stock Index Series between
Westpeak Investment Advisors, Incorporated and New England Funds,
L.P. is incorporated herein by reference to Post-Effective
Amendment No 17 on Form N-1A (File No. 2-83538) filed on April
29, 1994.
(i) Service Agreement relating to each of the Back Bay
Advisors Money Market Series, Back Bay Advisors Bond Income
Series, Westpeak Value Growth Series, Loomis Sayles Avanti Growth
Series, Westpeak Stock Index Series, Back Bay Advisors Managed
Series and Loomis Sayles Small Cap Series, Loomis Sayles Balanced
Series, Draycott International Equity Series, Salomon Brothers
U.S. Government Series, Salomon Brothers Strategic Bond
Opportunities Series, Venture Value Series, Alger Equity Growth
Series and Short-Term Series between TNE Advisers, Inc. and New
England Funds, L.P. is incorporated herein by reference to Post-
Effective Amendment No. 20 on Form N-1A (File No. 2-83538) filed
on May 4, 1995.
(10)(a) Opinion and Consent of counsel relating to the
Back Bay Advisors Money Market Series, Back Bay Advisors Bond
Income Series and Capital Growth Series incorporated herein by
reference to Post-Effective Amendment No. 6 on Form N-1A (File
No. 2-83538) filed on February 27, 1987.
(b) Opinion and Consent of counsel relating to the
Westpeak Stock Index Series and Back Bay Advisors Managed Series
incorporated herein by reference to Post-Effective Amendment No.
8 on Form N-1A (File No. 2-83538) filed on April 29, 1987.
(c) Opinion and Consent of counsel relating to the
Westpeak Value Growth and Loomis Sayles Avanti Growth Series is
incorporated herein by reference to Post-Effective Amendment No.
15 on Form N-1A (File No. 2-83538) filed on April 30, 1993.
(d) Opinion and Consent of counsel relating to the
Loomis Sayles Small Cap Series is incorporated herein by
reference to Post-Effective Amendment No. 17 on Form N-1A (File
No. 2-83538) filed on April 29, 1994.
(e) Opinion and Consent of counsel relating to each of
the Loomis Sayles Balanced Series, Draycott International Equity
Series, Salomon Brothers U.S. Government Series, Salomon Brothers
Strategic Bond Opportunities Series, Venture Value Series, Alger
Equity Growth Series and CS First Boston Strategic Equity
Opportunities Series is incorporated herein by reference to Post-
Effective Amendment No. 19 on Form N-1A (File No. 2-83538) filed
on March 2, 1995.
(11) Consent of Coopers and Lybrand is filed herewith.
(12) None.
(13) (a) Investment Letter of New England Securities
Corporation is incorporated herein by reference to Pre-Effective
Amendment No. 1 on Form N-1A (File No. 2-83538) filed on August
2, 1983.
(b) Investment Letter of The New England relating to
the Loomis Sayles Avanti Growth Series is incorporated herein by
reference to Post-Effective Amendment No. 15 on Form N-1A (File
No. 2-83538) filed on April 30, 1993.
(c) Investment Letter of The New England relating to
the Westpeak Value Growth Series is incorporated herein by
reference to Post-Effective Amendment No. 15 on Form N-1A (File
No. 2-83538) filed on April 30, 1993.
(d) Investment Letter of The New England relating to
the Loomis Sayles Small Cap Series is incorporated herein by
reference to Post-Effective Amendment No. 17 on Form N-1A (File
No. 2-83538) filed on April 29, 1994.
(14) None.
(15) None.
(16) Schedule for Computation of Performance Quotations is
herein incorporated by reference to Post-Effective Amendment No.
10 to Registration Statement on Form N-1A (File No. 2-83538)
filed on May 1, 1989.
* Incorporated herein by reference to Post-Effective Amendment
No. 5 on Form N-1A (File No. 2-83538) filed on December 29, 1986.
** Incorporated herein by reference to Post-Effective Amendment
No. 7 on Form N-1A (File No. 2-83538) filed on March 2, 1987.
*** Incorporated herein by reference to Post-Effective Amendment
No. 11 on Form N-1A (File No. 2-83538) filed on May 1, 1990.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Holders of Securities
The following table sets forth the number of record holders
of each class of securities of the Fund as of February 1, 1996:
Title of Class Number of
Record Holders
Shares of Beneficial Interest 3
Money Market Series
Shares of Beneficial Interest 3
Bond Income Series
Shares of Beneficial Interest 2
Capital Growth Series
Shares of Beneficial Interest 2
Stock Index Series
Shares of Beneficial Interest 2
Managed Series
Shares of Beneficial Interest 4
Avanti Growth Series
Shares of Beneficial Interest 4
Value Growth Series
Shares of Beneficial Interest 4
Loomis Sayles Small Cap Series
Shares of Beneficial Interest 4
Loomis Sayles Balanced Series
Shares of Beneficial Interest 4
Draycott International Equity
Series
Shares of Beneficial Interest 2
Salomon Brothers U.S. Government
Series
Shares of Beneficial Interest 3
Salomon Brothers Strategic Bond
Opportunities
Series
Shares of Beneficial Interest 4
Venture Value Series
Shares of Beneficial Interest 4
Alger Equity Growth Series
Item 27. Indemnification
See Article 4 of the Fund's By-Laws filed as Exhibit 2 to
Post-Effective Amendment No. 8 on Form N-1A (File No. 2-83538)
which Exhibit is incorporated herein by reference.
In addition, the Fund maintains a trustees and officers
liability insurance policy with a maximum coverage of $15 million
under which the Fund and its trustees and officers are named
insureds.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the Fund's By-
Laws, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful
defense of any action, suit of proceeding) is asserted by such
trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
Item 28. Business and other Connections of Investment Adviser
(a) TNE Advisers, Inc., is the adviser of the Back Bay Advisers
Money Market Series, Back Bay Advisers Bond Income Series,
Westpeak Value Growth Series, Loomis Sayles Avanti Growth Series,
Westpeak Stock Index Series, Back Bay Advisors Managed Series,
Loomis Sayles Small Cap Series, Loomis Sayles Balanced Series,
Draycott International Equity Series, Salomon Brothers U.S.
Government Series, Salomon Brothers Strategic Bond Opportunities
Series, Venture Value Series and the Alger Equity Growth Series
and has entered into subadvisory agreements for these Series with
Back Bay Advisors, Westpeak, Loomis Sayles, Draycott Partners,
Ltd., Salomon Brothers Asset Management Inc, Salomon Brothers
Asset Management Inc, Davis Selected Advisers, L.P. and Fred
Alger Management, Inc., respectively. TNE Advisers, a wholly-
owned subsidiary of The New England, was organized in 1994 and
oversees, evaluates and monitors the subadvisers' provision of
investment advisory services to the Series and provides general
management and administration to the Series.
Such adviser's directors and officers have been engaged
during the past two years in the following other businesses,
vocations or employments of a substantial nature.
Name and
Office with Name and Address
TNE Advisers, of Other
Inc. Affiliations Nature of Connection
Frederick K. New England Chief Investment
Zimmermann Mutual Life Officer and Executive
Chairman of Insurance Company Vice President
the Board and Boston, MA 02117
President
New England Chairman
Portfolio
Advisors, Inc.
501 Boylston
Street
Boston, MA 02117
New England Director and Vice
Variable President
Life Insurance of Investments
Company
501 Boylston
Street
Boston, MA 02117
New England Chairman, President and
Pension
and Annuity Vice President of
Company Investments
501 Boylston
Street
Boston, MA 02117
NEL Partnership Director and President
I, Inc.
501 Boylston
Street
Boston, MA 02117
New England Life Chairman and President
Mortgage Funding
Corp.
501 Boylston
Street
Boston, MA 02117
NELRECO Troy, Director
Inc.
501 Boylston
Street
Boston MA 02117
TNE Funding Corp. Chairman and President
501 Boylston
Street
Name and
Office with Name and Address
TNE Advisers, of Other Nature of Connection
Inc. Affiliations
John F. New England Vice President
Guthrie, Jr. Mutual
Senior Vice Life Insurance
President & Company
Director 501 Boylston
Street
Boston, MA 02117
New England President of Portfolio
Portfolio Strategy
Advisors, Inc.
501 Boylston
Street
Boston, MA 02117
New England Vice President of
Pension Portfolio
& Annuity Co. Strategy
501 Boylston
Street
Boston, MA 02117
New England Vice President of
Variable Portfolio
Life Insurance Strategy
Co.
501 Boylston
Street
Boston, MA 02117
Thomas C. New England Asset Allocation
McDevitt Mutual Consultant
Vice President Life Insurance
Company
501 Boylston
Street
Boston, MA 02117
New England Vice President
Portfolio
Advisors, Inc.
501 Boylston
Street
Boston, MA 02117
Beverly J. New England Attorney and Assistant
DeWitt Mutual Secretary
Chief Legal Life Insurance
Officer, Co.
Secretary and 501 Boylston
Clerk Street
Boston, MA 02117
New England Assistant Secretary
Securities Corp.
399 Boylston
Street
Boston, MA 02116
Name and Name and Address Nature of
Office with of Other Connection
TNE Advisers, Affiliations
Inc.
Beverly J. Westpeak Chief Legal Officer,
Dewitt Advisors, L.P. Assistant Secretary and
(cont.) 1011 Walnut St., Assistant Clerk
Suite 400
Boulder, CO 80302
Alan C. Leland New England Mutual Vice President
Chief Life Insurance Co.
Financial 501 Boylston
Officer and Street
Treasurer Boston, MA 02117
(b) Capital Growth Management Limited Partnership, the
adviser of the Capital Growth Series, provides investment advice
to a number of other registered investment companies and to other
organizations and individuals.
Name and
addresses
Name and office of other Nature of
with CGM affiliations Connection
Kenbob, Inc. None None
General Partner
(c) Back Bay Advisors, L.P. ("Back Bay Advisors"), the
subadviser of the Back Bay Advisors Money Market Series, Back Bay
Advisors Bond Income Series and Back Bay Advisors Managed Series,
is a wholly-owned subsidiary of NEIC and is indirectly controlled
by The New England. Its sole general partner is Back Bay
Advisors, Inc.
Back Bay Advisors serves as investment adviser to
a number of other registered investment companies. Back Bay
Advisors' directors and officers have been engaged during the
past two years in the following businesses, vocations or
employments of a substantial nature (former affiliations are
marked with an asterisk).
Name and Office
with Back Bay Advisors or Name and Address Nature of
Back Bay Advisors, Inc. of Other Connection
Affiliations
Peter S. Voss, New England Chairman of the
Chairman of the Board, Investment Board,
Director Chief Executive
Officer
Companies, L.P.
501 Boylston Street
Boston, MA 02117
New England Funds, Chairman of the
L.P. Board and Director
399 Boylston,
Boston, MA 02116
NEF Corporation Director
399 Boylston Street
Boston, MA 02116
Name and Office
with Back Bay Advisors Name and Address Nature of
or
Back Bay Advisors, of Other Connection
Inc. Affiliations
Peter S. Voss, TNE Investment Director and
Chairman of the Board, Services Corp* Chairman
Director
(contd.) 399 Boylston
Street
Boston, MA
02116
New England Director
Mutual
Life Insurance
Company
501 Boylston
Street
Boston, MA 02117
New England President, CEO
Investment and Director
Companies, Inc.
399 Boylston
Street
Boston, MA 02116
Westpeak Chairman and
Investment Director
Advisors, Inc.
1050 Walnut
Street, Suite
300
Boulder, CO
80302
NEF Corporation Director
399 Boylston
Street
Boston, MA
02116
Charles T. Wallis, New England Officer
Securities
Director, President Corporation
and Chief Executive 399 Boylston
Officer Street
Boston, MA
02116
New England
Funds, L.P. Director
399 Boylston
Street
Boston, MA
02116
Charles G. Glueck, None None
Senior Vice
President
Scott A. Millimet Chicago Board of Senior Vice
Executive Vice Trade* President
President 141 West Jackson and Manager of
Boulevard Carroll McEntee
Chicago, IL & McGinley
60604
J. Scott Nicholson, None None
Senior Vice President
Edgar M. Reed Aetna Capital Head of Fixed
Executive Vice Management* Income
President Management Group
151 Farmington
Avenue
Hartford, CT
06156
Name and Office
with Back Bay Advisors Name and Address Nature of
or
Back Bay Advisors, of Other Connection
Inc. Affiliations
Nathan R. Wentworth, None None
Vice President
Paul Zamagni, None None
Vice President and
Treasurer
Catherine L. Bunting, None None
Senior Vice
President
Peter Hanson, NEIC Counsel and
Senior
Secretary and 399 Boylston Vice President,
Street Assistant
Clerk Boston, MA 02116 Secretary and
Assistant Clerk
Draycott Assistant
Partners, Ltd.* Secretary and
No. 8 City Road Assistant Clerk
London, England
EC2Y 1HE
Peter Palfrey, None None
Vice President
John Donovan, None None
Investment Officer
(d) Westpeak Investment Advisors, L.P., the subadviser of the
Westpeak Value Growth Series and Westpeak Stock Index Series, is
a wholly-owned subsidiary of NEIC. Its sole general partner is
Westpeak Investment Advisors, Inc. Organized in 1991, Westpeak
provides investment management services to other institutional
clients, including accounts of The New England and its
affiliates.
Westpeak's directors and officers have been engaged during the
past two years in the following businesses, vocations or
employments of a substantial nature.
Name and Office
with Westpeak Name and Address Nature of
Investment Advisors, of Other Connection
Inc. Affiliations
Gerald H. Scriver, None None
President, Chief
Executive Officer,
Chief Investment
Officer, Director
Peter S. Voss, NEIC Chairman of the
Chairman of the 399 Boylston Board, Chief
Street Executive
Board, Director Boston, MA Officer
02116
Name and Office
with Westpeak Name and Address Nature of
Investment Advisors, of Other Connection
Inc. Affiliations
Peter S. Voss, New England Chairman of the
Chairman of the Board, Funds, L.P. Board and
Director 399 Boylston Director
(contd.) Street
Boston, MA 02116
Back Bay Chairman of the
Advisors Board
399 Boylston and Director
Street
Boston, MA 02116
New England Chairmanof the
Board,
Investment Chief Executive
Companies, L.P. Officer
501 Boylston
Street
Boston, MA
02117
NEF Corporation Director
399 Boylston
Street
Boston, MA
02116
TNE Investment Director
Services Corp.* and Chairman
399 Boylston
Street
Boston, MA
02116
New England Director
Mutual
Life Insurance
Company
501 Boylston
Street
Boston, MA 02117
New England President, CEO
Investment and Director
Companies, Inc.
399 Boylston
Street
Boston, MA 02116
Sherry A. Umberfield, NEIC Executive Vice
Director 399 Boylston President
Street
Boston, MA 02116
New England Director
Investment
Associates, Inc
399 Boylston
Street
Boston, MA 02116
NEF Corporation Director
399 Boylston
Street
Boston, MA 02116
Name and Office
with Westpeak Name and Address Nature of
Investment Advisors, of Other Connection
Inc. Affiliations
Edward N. Wadsworth, NEIC Executive Vice
Clerk and Secretary, 399 Boylston President,
Street
Chief Legal Officer Boston, MA 02116 Clerk, Secretary
and
General Counsel
Marlborough Assistant Clerk
Capital
Advisors, Inc.
399 Boylston
Street
Boston, MA 02116
New England Secretary
Investment
Associates, Inc.
399 Boylston
Street
Boston, MA 02116
Robert A. Franz, None None
Senior Vice
President
Philip J. Cooper, None None
Executive Vice
President
Compliance Officer
Beverly J. DeWitt, New England Attorney and
Mutual Assistant
Chief Legal Officer Life Insurance Secretary
Company
501 Boylston
Street
Boston, MA
02117
TNE Advisers, Chief Legal
Inc. Officer,
501 Boylston Secretary and
Street Clerk
Boston, MA 02117
(e) Loomis, Sayles & Company, L.P. ("Loomis Sayles"), the
subadviser of the Loomis Sayles Avanti Growth Series, the Loomis
Sayles Small Cap Series and the Loomis Sayles Balanced Series,
provides investment advice to a number of other registered
investment companies and to other organizations and individuals.
Loomis Sayles is a wholly-owned subsidiary of New England
Investment Companies, L.P. ("NEIC") and is indirectly controlled
by The New England. Its sole general partner is Loomis Sayles &
Co., Inc.
Such subadviser's directors and officers have been engaged during
the past two years in the following other businesses, vocations
or employments of a substantial nature:
Name and Office
with Loomis Sayles Name and Address Nature of
or
Loomis Sayles & of Other Connection
Co., Inc. Affiliations
Robert J. None None
Blanding,
President and
Chief
Operating Officer
Name and Office
with Loomis Sayles Name and Address Nature of
or
Loomis Sayles & of Other Connection
Co., Inc. Affiliations
Sandy P. Tichenor,
Vice President,
General
Counsel, Secretary
and Clerk
Jeffrey L. Meade
Richard W. None None
Hurckes,
Vice President
Scott Pape, None None
Vice President
Mary Champagne, None None
Vice President
Jeffrey C. None None
Petherick,
Vice President
Douglas Ramos, None None
Vice President
Meri Anne Beck, None None
Vice President
(f) Fred Alger Management, Inc., the subadviser of Alger Equity
Growth Series, provides investment advice to a number of other
registered investment companies and to other organizations and
individuals.
Such subadviser's directors and officers have been engaged during
the past two years in the following other businesses, vocations
or employments of a substantial nature.
Name and Office
with Fred Alger Name and Nature of
Address of
Management, Inc. Other Connection
Affiliations
Fred M. Alger Alger Chairman
III, Properties,
Inc.
Chairman 75 Maiden Lane
New York, NY
10038
The Alger Fund Chairman
75 Maiden Lane
New York, NY
10038
Alger Chairman
Associates,
Inc.
75 Maiden Lane
New York, NY
10038
Name and Office
with Fred Alger Name and Address of Nature of
Management, Inc. Other Affiliations Connection
Fred M. Alger Castle Convertible Chairman
III,
Chairman Fund, Inc.
(contd.) 75 Maiden Lane
New York, NY 10038
Spectra Fund Chairman
75 Maiden Lane
New York, NY 10038
Fred Alger & Chairman
Company,
Incorporated
30 Montgomery
Street
Jersey City, NJ
07302
Alger Shareholder Chairman
30 Montgomery
Street
Jersey City, NJ
07302
The Alger American Chairman
Fund
75 Maiden Lane
New York, NY 10038
Alger Life Chairman
Insurance
Agency, Inc.
75 Maiden Lane
New York, NY 10038
Analysts Resources, Chairman
Inc.
75 Maiden Lane
New York, NY 10038
The Alger Defined Chairman
Contribution Trust
75 Maiden Lane
New York, NY 10038
David D. Alger, The Alger Fund Trustee and
Director and 75 Maiden Lane President
President New York, NY 10038
Alger Properties, Director and
Inc.
75 Maiden Lane
New York, NY 10038 President
Alger Associates, Director and
Inc.
75 Maiden Lane
New York, NY 10038 President
Castle Convertible Director and
Fund, Inc.
75 Maiden Lane President
New York, NY 10038
Name and Office
with Fred Alger Name and Address of Nature of
Management, Inc. Other Affiliations Connection
Jersey City, NJ
07302
David D. Alger, Fred Alger & Director and
Company,
Director and Incorporated President
President 30 Montgomery
(contd.) Street
Alger Shareholder Director
Services, Inc. President
30 Montgomery
Street
Jersey City, NJ
07302
The Alger American Trustee and
Fund
75 Maiden Lane President
New York, NY 10038
Spectra Fund Director and
75 Maiden Lane
New York, NY 10038 President
Alger Life Director and
Insurance
Agency, Inc.
75 Maiden Lane President
New York, NY 10038
Analysts Resources, Director and
Inc.
75 Maiden Lane President
New York, NY 10038
The Alger Defined Trustee and
Contribution Trust President
75 Maiden Lane
New York, NY 10038
Gregory S. Duch, Alger Associates Executive Vice
Treasurer, 75 Maiden Lane President and
Executive New York, NY 10038 Treasurer
Vice President
and Director
Alger Properties, Executive Vice
Inc. President, Director
75 Maiden Lane
New York, NY 10038 and Treasurer
New York, NY 10038
Fred Alger & Executive Vice
Company, President
Incorporated and Treasurer
30 Montgomery
Street
Jersey City, NJ
07302
Alger Shareholder Executive Vice
Services, Inc. President and
Treasurer
30 Montgomery
Street
Jersey City, NJ
07302
Name and Office
with Fred Alger Name and Address of Nature of
Management, Inc. Other Affiliations Connection
Gregory S. Duch, The Alger Fund Treasurer
(contd.) 75 Maiden Lane
New York, NY 10038
The Alger American Treasurer
Fund
75 Maiden Lane
New York, NY 10038
Castle Convertible
Fund, Inc.
75 Maiden lane
New York, NY 10038
Spectra Fund Treasurer
75 Maiden Lane
New York, NY 10038
Alger Life Executive Vice
Insurance President
Agency, Inc. and Treasurer
75 Maiden Lane
New York, NY 10038
Analysts Resources, Executive Vice
Inc. President
75 Maiden Lane and Treasurer
New York, NY 10038
The Alger Defined Treasurer
Contribution Trust
75 Maiden Lane
New York, NY 10038
Mary E. Mardsen Fred Alger & Secretary
Company,
Cochran Incorporated
Secretary 30 Montgomery
Street
Jersey City, NJ
07302
Alger Associates, Secretary
Inc.
75 Maiden Lane
New York, NY 10038
Alger Shareholder Secretary
Services, Inc.
30 Montgomery
Street
Jersey City, NJ
07302
(g)Davis Selected Advisers, L.P., the subadviser of the Venture
Value Series, provides investment advice to a number of other
registered investment companies and to other organizations and
individuals.
Such subadviser's directors and officers have been engaged during
the past two years in the following other businesses, vocations
or employments of a substantial nature (former affiliations are
marked with an asterisk).
Name and Office Name and Address of Nature of
with
Davis Selected Other Affiliations Connection
Advisers, L.P.
Shelby M.C. Davis Selected American Director and
Chairman and Shares, Inc. President
Majority
Shareholder of 124 East Marcy
the Street
General Partner Santa Fe, NM 87501
Selected Special Director and
Shares, Inc. President
124 East Marcy
Street
Santa Fe, NM 87501
Selected Capital Trustee and
Preservation Trust President
124 East Marcy
Street
Santa Fe, NM 87501
Davis Series, Inc. Director and
124 East Marcy President
Street
Santa Fe, NM 87501
Davis Tax-Free High Director and
Income Fund President
124 East Marcy
Street
Santa Fe, NM 87501
Davis High Income Director and
Fund President
124 East Marcy
Street
Santa Fe, NM 87501
Davis New York Director and
Venture
Fund, Inc. President
124 East Marcy
Street
Santa Fe, NM 87501
Davis International Director and
Series,
Inc. President
124 East Marcy
Street
Santa Fe, NM 87501
Venture Advisers, Director and
Inc.
124 East Marcy Chairman
Street
Santa Fe, NM 87501
Shelby Cullom Davis Director and
Financial Shareholder
Consultants
70 Pine Street
New York, NY 10270
Name and Office Name and Address Nature of
with of
Davis Selected Other Connection
Affiliations
Advisers, L.P.
Shelby M.C. Davis Fiduciary Trust Consultant
(contd.) Co.,
International
2 World Trade
Center
New York, NY
10048
Carl Luff Davis New York Vice President,
Venture
Director, Fund, Inc. Treasurer and
President Assistant
and Treasurer of 124 East Marcy Secretary
the Street
General Partner Santa Fe, NM
87501
Davis Tax-Free Vice President,
High
Income Fund Treasurer and
Assistant
124 East Marcy Secretary
Street
Santa Fe, NM
87501
Davis High Income Vice President,
Fund
124 East Marcy Treasurer and
Street Assistant
Santa Fe, NM Secretary
87501
Davis Series, Vice President,
Inc.
124 East Marcy Treasurer and
Street Assistant
Santa Fe, NM Secretary
87501
Selected American Vice President,
Shares, Inc. Treasurer and
Assistant
124 East Marcy Secretary
Street
Santa Fe, NM
87501
Selected Special Vice President,
Shares, Inc. Treasurer and
Assistant
124 East Marcy Secretary
Street
Santa Fe, NM
87501
Selected Capital Vice President,
Preservation Treasurer and
Assistant
Trust Secretary
124 East Marcy
Street
Santa Fe, NM
87501
Davis Vice President,
International
Series,
Inc. Treasurer and
Assistant
124 East Marcy Secretary
Street
Santa Fe, NM
87501
Raymond O. Davis New York Vice President,
Padilla Venture
Senior Vice Fund Inc. Secretary and
President
of the General 124 East Marcy Assistant Treasurer
Partner Street
Santa Fe, NM
87501
Name and Office
with
Davis Selected Name and Address Nature of
of
Advisers, L.P. Other Connection
Affiliations
Raymond O. Davis Tax-Free Vice President,
Padilla High Income Fund Secretary and
(contd.)
124 East Marcy Assistant Treasurer
Street
Santa Fe, NM
87501
Davis High Income Vice President,
Fund
124 East Marcy Secretary and
Street
Santa Fe, NM Assistant Treasurer
87501
Davis Series, Vice President
Inc.
124 East Marcy Secretary and
Street
Santa Fe, NM Assistant Treasurer
87501
Selected American Vice President and
Shares, Inc. Secretary
124 East Marcy
Street
Santa Fe, NM
87501
Selected Special Vice President and
Shares
124 East Marcy Secretary
Street
Santa Fe, NM
87501
Selected Capital Vice President and
Preservation Secretary
Trust
124 East Marcy
Street
Santa Fe, NM
87501
Davis Vice President,
International
Series,
Inc. Secretary and
124 East Marcy Assistant Treasurer
Street
Santa Fe, NM
87501
Carolyn H. Davis New York Vice President
Spolidoro, Venture
Vice President of Fund, Inc.
the General 124 East Marcy
Partner Street
Santa Fe. NM
87501
Davis Series, Vice President
Inc.
124 East Marcy
Street
Santa Fe, NM
87501
Davis High Income Vice President
Fund
124 East Marcy
Street
Santa Fe, NM
87501
Davis Tax-Free Vice President
High Income Fund
124 East Marcy
Street
Santa Fe, NM
87501
Name and Office
with
Davis Selected Name and Address Nature of
of
Advisers, L.P. Other Affiliations Connection
Carolyn H. Venture Advisers, Vice President
Spolidoro Inc.
(contd.) 124 East Marcy
Street
Santa Fe, NM 87501
Davis Vice President
International
Series,
Inc.
124 East Marcy
Street
Santa Fe, NM 87501
Eileen Street, Davis New York Assistant Treasurer
Venture
Senior Vice Fund, Inc. and Assistant
President 124 East Marcy Secretary
and Secretary of Street
the Santa Fe, NM 87501
General Partner
Davis Tax-Free Assistant Treasurer
High Income Fund and Assistant
Secretary
124 East Marcy
Street
Santa Fe, NM
87501
Davis Series, Inc. Assistant Treasurer
124 East Marcy and Assistant
Street Secretary
Santa Fe, NM
87501
Secretary
Davis High Income Assistant Treasurer
Fund and
124 East Marcy Assistant Secretary
Street
Santa Fe, NM 87501
Selected American Assistant Treasurer
Shares, Inc. and
Assistant Secretary
124 East Marcy
Street
Santa Fe, NM
87501
Selected Special Assistant Treasurer
Shares and
124 East Marcy Assistant Secretary
Street
Santa Fe, NM
87501
Davis Assistant Treasurer
International and
Services, Inc. Assistant Secretary
124 East Marcy
Street
Santa Fe, NM 87501
Selected Capital Assistant Treasurer
Preservation Trust and
Assistant Secretary
124 East Marcy
Street
Santa Fe, NM
87501
Name and Office
with
Davis Selected Name and Address Nature and
of
Advisers, L.P. Other Affiliations Connection
Andrew A. Davis, Shelby Cullom Consultant
President Davis & Co.
of the General 70 Pine Street
Partner
New York, NY 10270
Capital Ideas, Consultant
Inc.
140 North Beach
Road
Hobe Sound, FL
33475
Davis Series, Inc. Vice President
124 East Marcy
Street
Santa Fe, NM 87501
Davis Vice President
International
Series, Inc.
124 East Marcy
Street
Santa Fe, NM 87501
Davis Tax-Free Vice President
High Income
Fund
124 East Marcy
Street
Santa Fe, NM 87501
Davis High Income Vice President
Fund
124 East Marcy
Street
Santa Fe, NM 87501
Davis New York Vice President
Venture
Fund, Inc.
124 East Marcy
Street
Santa Fe, NM 87501
(h) Salomon Brothers Asset Management Inc, the subadviser of
Salomon Brothers U.S. Government Series and Salomon Brothers
Strategic Bond Opportunities Series, provides investment advice
to a number of other registered investment companies and to other
organizations and individuals.
Such subadviser's directors and officers have been engaged during
the past two years in the following other businesses, vocations
or employments of a substantial nature (former affiliations are
marked with an asterisk).
Name and Office Name and Address Nature of
with of
Salomon Brothers Other Connection
Affiliations
Asset Management
Inc
Thomas W. Brock, Salomon Brothers Managing
Inc
Chairman and 7 World Trade Director
Chief Center
Executive Officer New York, NY
10048
Name and Office Name and Address Nature of
with of
Salomon Brothers Other Connection
Affiliations
Asset Management
Inc
Vilas Gadkari Salomon Brothers Managing Director
Inc
Director Victoria Plaza
111 Buckingham
Palace Road
London SWIW05B
England
Salomon Brothers Managing Director
International
Limited
Victoria Plaza
111 Buckingham
Palace Road
London SW1W05B
England
Rodney B. Berens Salomon Brothers Managing Director
Inc
7 World Trade
Center
New York, NY
10048
Salomon Brothers Managing Director
International
Limited
Victoria Plaza
111 Buckingham
Palace Road
London SW1W05B
England
Richard J. Salomon Brothers Controller
Carbone Inc
Treasurer 7 World Trade
Center
New York, NY
10048
Michael S. Hyland Salomon Brothers Managing Director
Inc
President 7 World Trade
Center
New York, NY
10048
Salomon Brothers Chairman
Asset*
Management
Limited
7 World Trade
Center
New York, NY
10048
James J. Lee Salomon Brothers Director
Inc
Director 7 World Trade
Center
New York, NY
10048
Zachary Snow Salomon Brothers Managing Director
Inc
Secretary 7 World Trade
Center
New York, NY
10048
(i) Draycott Partners, Ltd. ("Draycott"), the subadviser of
Draycott International Equity Series is a wholly-owned subsidiary
of Cursitor Holdings, Ltd. and provides investment advice to one
separate account of The New England, the former indirect parent
corporation of Draycott. The former separate account is the
International Equity Separate Account. Interests in such separate
account is offered to U.S. tax-qualified pension and profit-
sharing plans by means of group annuity contracts issued by
NEMLICO.
Draycott's directors and officers have been engaged during the
past two years in the following other businesses, vocations or
employments of a substantial nature:
Name and Address
Name and Office with of Other Nature of
Draycott Affiliations Connection
Nicholas D.P. Carn, CIGNA Managing
Director, Chief International Director,
Executive Officer, Investment International
President, Chief Advisors, Ltd. Equities Group
Investment Officer 16 Finsbury
and Principal Circus
London EC2Y 1HE
Hugh McCurdy Eaton HME Chairman
International
Director Advisory
Associates, L.P.
1010 Franklin
Avenue
Suite 414
Garden City, NY
11530
Cursitor Principal
Management Ltd.
66 Buckingham
Gate
London SW1E 6AU
Cursitor Principal and
Holdings Ltd. CEO
66 Buckingham
Gate
London SW1E 6AU
Cursitor-Eaton Principal and
Asset CEO
Management
Company
Main Street, PO
Box 446
Dublin, NH 03444
HME Partners President and
Inc. Director
211 East 49th
Street
New York, NY
10017
HME Chairman
International
Advisory
Associates
1010 Franklin
Avenue
Suite 414
Garden City, NY
11530
Name and Address
Name and Office with of Other Nature of
Draycott Affiliations Connection
Jens Christian Cursitor-Eaton Vice President
Sorensen Asset and
Management Co. Associate
38 Newbury
Street
Boston, MA 02116-
3210
HME Associate
International
Advisory
Associates Inc.
211 East 49th
Street
New York, NY
10017
Robert G. Barrett, None None
Chief Financial
Officer,
Treasurer, Vice
President,
Principal, Compliance
Officer
and Assistant
Secretary
Timothy S. Griffen, None None
Senior Portfolio
Manager
and Principal
Item 29. Principal Underwriters
(a) New England Securities Corporation also serves as
principal underwriter for:
New England Variable Life Separate Account
New England Variable Annuity Fund I
New England Life Retirement Investment Account
The New England Variable Account
New England Variable Annuity Separate Account
(b) The directors and officers of the Registrant's principal
underwriter, New England Securities Corporation, and their
addresses are as follows:
Positions and Offices with
Officer's
Name Principal Underwriter Registrant
Thomas W. McConnell** President, Director None
and Chief Executive
Officer
Kernan F. King* Chairman of the None
Board,
Director
Beverly J. DeWitt* Assistant Secretary None
Peter Lahaie** Assistant Vice
President,
Treasurer and None
Controller
Anne M. Goggin* Vice President, None
General
Counsel, Secretary
and
Clerk
Mark F. Greco** Vice President None
Laura A. Hutner** Vice President None
Robert F. Regan*** Vice President None
Positions and Offices
Officer's with
Name Principal Registra
Underwriter nt
Jonathan M. Rozek** Vice President None
Henry L.P. Director None
Schmelzer**
Robert E. Schneider* Director None
Michael E. Toland** Vice President, None
Assistant Secretary,
Assistant Clerk and
Chief Financial
Officer
Peter S. Voss** Director None
* Business Address: 501 Boylston Street, Boston, MA 02117
** Business Address: 399 Boylston Street, Boston, MA 02116
***Business Address: 500 Boylston Street, Boston, MA 02117
Item 30. Location of Accounts and Records
The following companies maintain possession of the documents
required by the specified rules:
(a) Registrant
Rule 31a-1(a)(4)
Rule 31a-2(a)
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Rule 31a-1(a)
Rule 31a-1(b)(1), (2), (3), (5), (6),
(7), (8)
Rule 31a-2(a)
(c) For the Back Bay Advisors Money Market Series, the Back Bay
Advisors Bond Income Series and the Back Bay Advisors Managed
Series:
Back Bay Advisors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Rule 31a-1(a); 31a-1(b)(9), (10),
(11); 31a-1(f)
Rule 31a-2(a); 31a-2(e)
For the Westpeak Value Growth and Westpeak Stock Index Series:
Westpeak Investment Advisors, L.P.
1011 Walnut St. Suite 400
Boulder, Colorado 80302
Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)
For the Loomis Sayles Avanti Growth, Loomis Sayles Small Cap and
Loomis Sayles Balanced Series:
Loomis Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02110
Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)
For the Draycott International Equity Series:
Draycott Partners, Ltd.
8 City Road
London, England EC2Y 1HE
Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)
For the Salomon Brothers U. S. Government Series and the Salomon
Brothers Strategic Bond Opportunities Series:
Salomon Brothers Asset Management Inc.
7 World Trade Center
New York, New York 10048
Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)
For the Venture Value Series:
Selected/Venture Advisers, L.P.
124 East Marcy Street
Santa Fe, NM 87501
Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)
For the Alger Equity Growth Series:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)
For the Capital Growth Series:
Capital Growth Management Limited Partnership
One Financial Center
Boston, Massachusetts 02111
Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)
(d) New England Securities Corporation
399 Boylston Street
Boston, Massachusetts 02116
Rule 31a-1(d)
Rule 31a-2(c)
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant undertakes to provide the Fund's annual
report to any person who receives a Fund prospectus and who
requests the annual report.
********
A copy of the Agreement and Declaration of Trust
establishing New England Zenith Fund is on file with the
Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Registration Statement is
executed on behalf of the Fund by officers of the Fund as
officers and not individually and that the obligations of or
arising out of this Registration Statement are not binding upon
any of the Trustees, officers or shareholders individually but
are binding only upon the assets and property of the Fund.
<PAGE>
NEW ENGLAND ZENITH FUND
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it has duly caused this Post-Effective Amendment No. 21 to
its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Boston, and
Commonwealth of Massachusetts, on the 29th day of February 1996.
New England Zenith Fund
By: FREDERICK ZIMMERMANN
Frederick K. Zimmermann
Chief Executive Officer
*By:/s/FRANK NESVET
Frank Nesvet
Attorney-In-Fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Signature Title Date
FREDERICK K. Chairman of the February 29, 1996
ZIMMERMANN Board; Chief
Frederick K. Executive Officer;
Zimmermann President and
Trustee
FRANK NESVET Treasurer February 29, 1996
Frank Nesvet
ANNE GOGGIN Trustee February 29, 1996
Anne Goggin
JOSEPH M. HINCHEY* Trustee February 29, 1996
Joseph M. Hinchey
RICHARD S. HUMPHREY, Trustee February 29, 1996
Jr.*
Richard S. Humphrey,
Jr.
ROBERT B. KITTREDGE* Trustee February 29, 1996
Robert B. Kittredge
LAURENS MACLURE* Trustee February 29, 1996
Laurens MacLure
NANCY HAWTHORNE Trustee February 29, 1996
Nancy Hawthorne
DALE ROGERS MARSHALL Trustee February 29, 1996
Dale Rogers Marshall
JOSEPH F. TURLEY* Trustee February 29, 1996
Joseph F. Turley
*By:/s/FRANK NESVET
Frank Nesvet
Attorney-In-Fact
February 29, 1996
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT
5(m) Form of Advisory Agreement for
the Alger Equity Growth Series
between the Fund and TNE
Advisers, Inc.
5(n) Form of Sub-Advisory Agreement
for the Alger Equity Growth
Series between TNE Advisers,
Inc. and Fred Alger Management,
Inc.
5(o) Form of Sub-Advisory Agreement
for the Draycott International
Equity Series between TNE
Advisers, Inc. and Draycott
Partners, Ltd.
5(p) Form of Sub-Advisory Agreement
for the Draycott International
Equity Series between TNE
Advisers, Inc. and Draycott
Partners, Ltd.
9(f) Powers of Attorney of Trustees
11 Consent of Coopers and Lybrand
EXHIBIT 5(M)
FORM OF ADVISORY AGREEMENT FOR THE ALGER EQUITY GROWTH SERIES
BETWEEN THE FUND AND TNE ADVISERS, INC.
EXHIBIT 5(N)
FORM OF SUB-ADVISORY AGREEMENT FOR THE ALGER EQUITY GROWTH SERIES
BETWEEN TNE ADVISERS, INC. AND FRED ALGER MANAGEMENT, INC.
EXHIBIT 5(O)
FORM OF SUB-ADVISORY AGREEMENT FOR THE DRAYCOTT INTERNATIONAL
EQUITY SERIES BETWEEN TNE ADVISERS, INC. AND DRAYCOTT PARTNERS,
LTD.
EXHIBIT 5(P)
FORM OF SUB-ADVISORY AGREEMENT FOR THE DRAYCOTT INTERNATIONAL
EQUITY SERIES BETWEEN TNE ADVISERS, INC. AND DRAYCOTT PARTNERS,
LTD.
EXHIBIT 9(F)
POWERS OF ATTORNEY OF TRUSTEES
EXHIBIT 11
CONSENT OF COOPERS AND LYBRAND
ADVISORY AGREEMENT
(Alger Equity Growth Series)
AGREEMENT made this 1st day of May, 1996 by and between
NEW ENGLAND ZENITH
FUND, a Massachusetts business trust (the "Fund") with
respect to its Alger Equity Growth Series
(the "Series"), and TNE ADVISERS, INC., a Massachusetts
corporation (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an
agreement setting forth the
terms upon which the Manager (or certain other parties
acting pursuant to delegation from the
Manager) will perform certain services for the Series;
NOW THEREFORE, in consideration of the premises and
covenants hereinafter contained,
the parties agree as follows:
1.(a) The Fund hereby employs the Manager to furnish
the Fund with Portfolio
Management Services (as defined in Section 2 hereof)
and Administrative Services (as
defined in Section 3 hereof), subject to the authority
of the Manager to delegate any or all
of its responsibilities hereunder to other parties as
provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees,
at its own expense, to furnish
such services (either directly or pursuant to
delegation to other parties as permitted by
Sections 1(b) and (c) hereof) and to assume the
obligations herein set forth, for the
compensation herein provided. The Manager shall,
unless otherwise expressly provided or
authorized, have no authority to act for or represent
the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its
responsibilities hereunder with respect
to the provision of Portfolio Management Services (and
assumption of related expenses) to
one or more other parties (each such party, a "Sub-
Adviser"), pursuant in each case to a
written agreement with such Sub-Adviser that meets the
requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder
(the "1940 Act") applicable to
contracts for service as investment adviser of a
registered investment company (including
without limitation the requirements for approval by the
trustees of the Fund and the
shareholders of the Series), subject, however, to such
exemptions as may be granted by the
Securities and Exchange Commission. Any Sub-Adviser
may (but need not) be affiliated
with the Manager. If different Sub-Advisers are
engaged to provide Portfolio Management
Services with respect to different segments of the
portfolio of the Series, the Manager shall
determine, in the manner described in the prospectus of
the Series from time to time in effect,
what portion of the assets belonging to the Series
shall be managed by each Sub-Adviser.
(c) The Manager may delegate any or all of its
responsibilities hereunder with respect
to the provision of Administrative Services to one or
more other parties (each such party, an
"Administrator") selected by the Manager. Any
Administrator may (but need not) be
affiliated with the Manager.
2. As used in this Agreement, "Portfolio Management
Services" means management of
the investment and reinvestment of the assets belonging to
the Series, consisting specifically of the
following:
(a) obtaining and evaluating such economic,
statistical and financial data and
information and undertaking such additional investment
research as shall be necessary or
advisable for the management of the investment and
reinvestment of the assets belonging to
the Series in accordance with the Series' investment
objectives and policies;
(b) taking such steps as are necessary to implement
the investment policies of the
Series by purchasing and selling of securities,
including the placing of orders for such
purchase and sale; and
(c) regularly reporting to the Board of Trustees of
the Fund with respect to the
implementation of the investment policies of the
Series.
3. As used in this Agreement, "Administrative Services"
means the provision to the Fund,
by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be
agreed upon from time to time by
the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for
managing the affairs of the Series,
including personnel to perform clerical, bookkeeping,
accounting, stenographic and other
office functions (exclusive of those related to and to
be performed under contract for
custodial, transfer, dividend and plan agency services
by the entity or entities selected to
perform such services;
(c) compensation, if any, of trustees of the Fund
who are directors, officers or
employees of the Manager, any Sub-Adviser or any
Administrator or of any affiliated person
(other than a registered investment company) of the
Manager, any Sub-Adviser or any
Administrator;
(d) all services, other than services of counsel,
required in connection with the
preparation of registration statements and
prospectuses, including amendments and revisions
thereto, all annual, semiannual and periodic reports,
and notices and proxy solicitation
material furnished to shareholders of the Fund or
regulatory authorities, to the extent that any
such materials relate to the business of the Series, to
the shareholders thereof or otherwise
to the Series, the Series to be treated for these
purposes as a separate legal entity and fund;
and
(e) supervision and oversight of the Portfolio
Management Services provided by each
Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable
laws and with the Series' investment policies,
restrictions and guidelines, if the Manager has
delegated to one or more Sub-Advisers any or all of its
responsibilities hereunder with
respect to the provision of Portfolio Management
Services.
4. Nothing in section 3 hereof shall require the
Manager to bear, or to reimburse the Fund
for:
(a) any of the costs of printing and mailing the
items referred to in sub-section (d) of
section 3;
(b) any of the costs of preparing, printing and
distributing sales literature;
(c) compensation of trustees of the Fund who are
not directors, officers or employees
of the Manager, any Sub-Adviser or any Administrator or
of any affiliated person (other than
a registered investment company) of the Manager, any
Sub-Adviser or any Administrator;
(d) registration, filing and other fees in
connection with requirements of regulatory
authorities;
(e) the charges and expenses of any entity
appointed by the Fund for custodial, paying
agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants
retained by the Fund;
(g) charges and expenses of any transfer agents and
registrars appointed by the Fund;
(h) brokers' commissions and issue and transfer
taxes chargeable to the Fund in
connection with securities transactions to which the
Fund is a party;
(i) taxes and fees payable by the Fund to federal,
state or other governmental agencies;
(j) any cost of certificates representing shares of
the Fund;
(k) legal fees and expenses in connection with the
affairs of the Fund including
registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and
trustees of the Fund; and
(m) interest, including interest on borrowings by
the Fund.
5. All activities undertaken by the Manager or any Sub-
Adviser or Administrator pursuant
to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees
of the Fund, any duly constituted committee thereof or any
officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any
Sub-Adviser or Administrator
hereunder are not to be deemed exclusive and the Manager and
any Sub-Adviser or Administrator
shall be free to render similar services to others, so long
as its services hereunder are not impaired
thereby.
7. As full compensation for all services rendered,
facilities furnished and expenses borne
by the Manager hereunder, the Fund shall pay the Manager
compensation at the annual rate of 0.75%
of the Series' average daily net assets. Such compensation
shall be payable monthly in arrears or at
such other intervals, not less frequently than quarterly, as
the Board of Trustees of the Fund may
from time to time determine and specify in writing to the
Manager. The Manager hereby
acknowledges that the Fund's obligation to pay such
compensation is binding only on the assets and
property belonging to the Series.
8. If the total of all ordinary business expenses of
the Fund as a whole (including
investment advisory fees but excluding taxes and portfolio
brokerage commissions) for any fiscal
year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed
by any state in which shares of the Series are qualified for
sale, the Manager shall pay such excess.
Solely for purposes of applying such limitations in
accordance with the foregoing sentence, the
Series and the Fund shall each be deemed to be a separate
fund subject to such limitations. Should
the applicable state limitation provisions fail to specify
how the average net assets of the Fund or
belonging to the Series are to be calculated, that figure
shall be calculated by reference to the average
daily net assets of the Fund or the Series, as the case may
be.
9. It is understood that any of the shareholders,
trustees, officers, employees and agents
of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested
in, the Manager, any affiliated person of the Manager, any
organization in which the Manager may
have an interest or any organization which may have an
interest in the Manager; that the Manager,
any such affiliated person or any such organization may have
an interest in the Fund; and that the
existence of any such dual interest shall not affect the
validity hereof or of any transactions
hereunder except as otherwise provided in the agreement and
declaration of trust of the Fund, the
articles of organization of the Manager or specific
provisions of applicable law.
10. This Agreement shall become effective as of the
date of its execution, and
(a) unless otherwise terminated, this Agreement
shall continue in effect for two years
from the date of execution, and from year to year
thereafter so long as such continuance is
specifically approved at least annually (i) by the
Board of Trustees of the Fund or by vote
of a majority of the outstanding voting securities of
the Series, and (ii) by vote of a majority
of the trustees of the Fund who are not interested
persons of the Fund or the Manager, cast
in person at a meeting called for the purpose of voting
on, such approval;
(b) this Agreement may at any time be terminated on
sixty days' written notice to the
Manager either by vote of the Board of Trustees of the
Fund or by vote of a majority of the
outstanding voting securities of the Series;
(c) this Agreement shall automatically terminate in
the event of its assignment;
(d) this Agreement may be terminated by the Manager
on ninety days' written notice
to the Fund;
(e) if New England Securities Corporation, the
Fund's principal underwriter, requires
the Fund or the Series to change its name so as to
eliminate all references to the words "New
England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution
Agreement relating to the Series with said principal
underwriter, this Agreement shall
automatically terminate at the time of such change
unless the continuance of this Agreement
after such change shall have been specifically approved
by vote of a majority of the
outstanding voting securities of the Series and by vote
of a majority of the trustees of the
Fund who are not interested persons of the Fund or the
Manager, cast in person at a meeting
called for the purpose of voting on such approval.
Termination of this Agreement pursuant to this section
10 shall be without the payment of
any penalty.
11. This Agreement may be amended at any time by
mutual consent of the parties, provided
that such consent on the part of the Fund shall have been
approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a
majority of the trustees of the Fund who
are not interested persons of the Fund or the Manager, cast
in person at a meeting called for the
purpose of voting on such approval.
12. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding
voting securities," "interested person," "affiliated person"
and "assignment" shall have their
respective meanings defined in the 1940 Act, subject,
however, to such exemptions as may be
granted by the Securities and Exchange Commission under the
1940 Act. References in this
Agreement to any assets, property or liabilities "belonging
to" the Series shall have the meaning
defined in the Fund's agreement and declaration of trust as
amended from time to time.
13. In the absence of willful misfeasance, bad faith
or gross negligence on the part of the
Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be
subject to any liability to the Fund, to any shareholder of
the Fund or to any other person, firm or
organization, for any act or omission in the course of, or
connected with, rendering services
hereunder.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the day and
year first above written.
NEW ENGLAND ZENITH FUND,
on behalf of its Alger Equity Growth Series
By __________________________________
TNE ADVISERS, INC.
By __________________________________
NOTICE
A copy of the Agreement and Declaration of Trust
establishing New England Zenith Fund
(the "Fund") is on file with the Secretary of The
Commonwealth of Massachusetts, and notice is
hereby given that this Agreement is executed with respect to
the Fund's Alger Equity Growth Series
(the "Series") on behalf of the Fund by officers of the Fund
as officers and not individually and that
the obligations of or arising out of this Agreement are not
binding upon any of the trustees, officers
or shareholders individually but are binding only upon the
assets and property belonging to the
Series.
SUB-ADVISORY AGREEMENT
Alger Equity Growth Series
This Sub-Advisory Agreement (this "Agreement") is
entered into as of the 1st day of May,
1996 by and between TNE Advisers, Inc., a Massachusetts
corporation (the "Manager") and Fred
Alger Management, Inc. (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory
Agreement dated May 1, 1996 (the
"Advisory Agreement") with New England Zenith Fund (the
"Trust"), pursuant to which the
Manager provides portfolio management and administrative
services to the Alger Equity Growth
Series of the Trust (the "Series");
WHEREAS, the Advisory Agreement provides that the
Manager may delegate any or all of
its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the Trustees of the Trust
desire to retain the Sub-Adviser to
render portfolio management services in the manner and on
the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth in
this Agreement, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of
the Manager and in cooperation with
any administrator appointed by the Manager (the
"Administrator"), manage the investment and
reinvestment of the assets of the Series. The Sub-Adviser
shall manage the Series in conformity
with (1) the investment objective, policies and restrictions
of the Series set forth in the Trust's
prospectus and statement of additional information relating
to the Series, (2) any additional policies
or guidelines established by the Manager or by the Trust's
trustees that have been furnished in
writing to the Sub-Adviser and (3) the provisions of the
Internal Revenue Code (the "Code")
applicable to "regulated investment companies" (as defined
in Section 851 of the Code) and Section
817 of the Code, all as from time to time in effect
(collectively, the "Policies"), and with all
applicable provisions of law, including without limitation
all applicable provisions of the Investment
Company Act of 1940 (the "1940 Act") and the rules and
regulations thereunder. Subject to the
foregoing, the Sub-Adviser is authorized, in its discretion
and without prior consultation with the
Manager, to buy, sell, lend and otherwise trade in any
stocks, bonds and other securities and
investment instruments on behalf of the Series, without
regard to the length of time the securities
have been held and the resulting rate of portfolio turnover
or any tax considerations; and the majority
or the whole of the Series may be invested in such
proportions of stocks, bonds, other securities or
investment instruments, or cash, as the Sub-Adviser shall
determine. Notwithstanding the foregoing
provisions of this Section 1.a, however, the Sub-Adviser
shall, upon written instructions from the
Manager, effect such portfolio transactions for the Series
as the Manager shall determine are
necessary in order for the Series to comply with the
Policies.
b. The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and
annual reports concerning transactions and performance of
the Series in such form as may be
mutually agreed upon, and agrees to review the Series and
discuss the management of the Series with
representatives or agents of the Manager, the Administrator
or the Trust at their reasonable request.
The Sub-Adviser shall permit all books and records with
respect to the Series to be inspected and
audited by the Manager and the Administrator at all
reasonable times during normal business hours,
upon reasonable notice. The Sub-Adviser shall also provide
the Manager, the Administrator or the
Trust with such other information and reports as may
reasonably be requested by the Manager, the
Administrator or the Trust from time to time, including
without limitation all material as reasonably
may be requested to the Trustees of the Trust pursuant to
Section 15(c) of the 1940 Act.
c. The Sub-Adviser shall provide to the Manager a copy
of the Sub-Adviser's Form ADV
as filed with the Securities and Exchange Commission and as
amended from time to time and a list
of the persons whom the Sub-Adviser wishes to have
authorized to give written and/or oral
instructions to custodians of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Trust's
custodian to provide) timely information
to the Sub-Adviser regarding such matters as the composition
of assets of the Series, cash
requirements and cash available for investment in the
Series, and all other information as may be
reasonably necessary for the Sub-Adviser to perform its
responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of
the prospectus and statement of
additional information of the Series and agrees during the
continuance of this Agreement to furnish
the Sub-Adviser copies of any revisions or supplements
thereto at, or, if practicable, before the time
the revisions or supplements become effective. The Manager
agrees to furnish the Sub-Adviser with
minutes of meetings of the Trustees of the Trust applicable
to the Series to the extent they may affect
the duties of the Sub-Adviser, and with copies of any
financial statements or reports made by the
Series to its shareholders, and any further materials or
information which the Sub-Adviser may
reasonably request to enable it to perform its functions
under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser
with a copy of the Series's
agreement with the custodian designated to hold the assets
of the Series (the "Custodian") and any
modifications thereto (the "Custody Agreement"), copies of
such modifications to be provided to the
Sub-Adviser a reasonable time in advance of the
effectiveness of such modifications. The assets of
the Series shall be maintained in the custody of the
Custodian identified in, and in accordance with
the terms and conditions of, the Custody Agreement (or any
sub-custodian properly appointed as
provided in the Custody Agreement). The Sub-Adviser shall
have no liability for the acts or
omissions of the Custodian, unless such act or omission is
required by and taken in reliance upon
instruction given to the Custodian by a representative of
the Sub-Adviser properly authorized to give
such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered
directly to the Custodian.
4. Proprietary Rights. The Manager agrees and
acknowledges that the Sub-Adviser is the
sole owner of the name and mark "Alger" and that all use of
any designation consisting in whole or
part of "Alger" (an "Alger Mark") under this Agreement shall
inure to the benefit of the Sub-Adviser. The Manager on its
own behalf and on behalf of the Series agrees not to use any
Alger
Mark in any advertisement or sales literature or other
materials promoting the Series, except with
the prior written consent of the Sub-Adviser. Without the
prior written consent of the Sub-Adviser,
the Manager shall not, and the Manager shall use its best
efforts to cause the Trust not to, make
representations regarding the Sub-Adviser in any disclosure
document, advertisement or sales
literature or other materials relating to the Series. Upon
termination of this Agreement for any
reason, the Manager shall cease, and the Manager shall use
its best efforts to cause the Series to
cease, all use of any Alger Mark(s) as soon as reasonably
practicable.
5. Expenses. Except for expenses specifically assumed
or agreed to be paid by the Sub-Adviser pursuant hereto, the
Sub-Adviser shall not be liable for any expenses of the
Manager or the
Trust including, without limitation, (a) interest and taxes,
(b) brokerage commissions and other costs
in connection with the purchase or sale of securities or
other investment instruments with respect to
the Series, and (c) custodian fees and expenses. The Sub-
Adviser will pay its own expenses incurred
in furnishing the services to be provided by it pursuant to
this Agreement.
6. Purchase and Sale of Assets. Absent instructions
from the Manager to the contrary, the
Sub-Adviser shall place all orders for the purchase and sale
of securities for the Series with brokers
or dealers selected by the Sub-Adviser, which may include
brokers or dealers affiliated with the Sub-Adviser, provided
such orders comply with Rule 17e-1 under the 1940 Act in all
respects. To the
extent consistent with applicable law, purchase or sell
orders for the Series may be aggregated with
contemporaneous purchase or sell orders of other clients of
the Sub-Adviser. In that event,
allocation of the securities purchased or sold, as well as
the expenses incurred in the transaction, will
be made by the Sub-Adviser in the manner it considers to be
most equitable and consistent with its
fiduciary obligations to the Series and to its other
clients. The Manager recognizes that in some
cases this procedure may adversely affect the price paid or
received by the Series or the size of the
position obtainable or disposable for the Series.
7. Compensation of the Sub-Adviser. As full
compensation for all services rendered,
facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the
Sub-Adviser compensation at the annual rate of 0.45% of the
first $100 million of the average daily
net assets of the Series, 0.40% of the next $400 million of
such assets and 0.35% of such assets in
excess of $500 million. Such compensation shall be payable
monthly in arrears or at such other
intervals, not less frequently than quarterly, as the
Manager is paid by the Series pursuant to the
Advisory Agreement. The Manager may from time to time waive
the compensation it is entitled to
receive from the Trust, however, and any such waiver will
have no effect on the Manager's
obligation to pay the Sub-Adviser the compensation provided
for herein.
8. Non-Exclusivity. The Manager and the Series agree
that the services of the Sub-Adviser
are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as
investment manager and provide other services to various
investment companies and other managed
accounts, except as the Sub-Adviser and the Manager or the
Administrator may otherwise agree from
time to time in writing before or after the date hereof.
This Agreement shall not in any way limit
or restrict the Sub-Adviser or any of its directors,
officers, employees or agents from buying, selling
or trading any securities or other investment instruments
for its or their own account or for the
account of others for whom it or they may be acting,
provided that such activities do not adversely
affect or otherwise impair the performance by the Sub-
Adviser of its duties and obligations under
this Agreement. The Manager and the Series recognize and
agree that the Sub-Adviser may provide
advice to or take action with respect to other clients,
which advice or action, including the timing
and nature of such action, may differ from or be identical
to advice given or action taken with respect
to the Series. The Sub-Adviser shall for all purposes
hereof be deemed to be an independent
contractor and shall, unless otherwise provided or
authorized, have no authority to act for or
represent the Trust or the Manager in any way or otherwise
be deemed an agent of the Trust or the
Manager.
9. Liability. Except as may otherwise be provided by
the 1940 Act or other federal
securities laws, neither the Sub-Adviser nor any of its
officers, directors, employees or agents (the
"Indemnified Parties") shall be subject to any liability to
the Manager, the Trust, the Series or any
shareholder of the Series for, and the Manager shall
indemnify and hold harmless the Indemnified
Parties against any loss, liability, cost, damage or expense
(including reasonable attorney fees)
arising from any claim or demand based upon, any error of
judgment, any mistake of law or any loss
arising out of any investment or other act or omission in
the course of, connected with, or arising out
of any service to be rendered under this Agreement, except
by reason of willful misfeasance, bad
faith or gross negligence in the performance of the Sub-
Adviser's duties or by reason of reckless
disregard by the Sub-Adviser of its obligations and duties.
The Manager acknowledges and agrees
that the Sub-Adviser makes no representation or warranty,
express or implied, that any level of
performance or investment results will be achieved by the
Series or that the Series will perform
comparably with any standard or index, including other
clients of the Sub-Adviser, whether public
or private.
10. Effective Date and Termination. This Agreement shall
become effective as of the date
of its execution, and
a. unless otherwise terminated, this Agreement shall
continue in effect for two years from
the date of execution, and from year to year thereafter so
long as such continuance is specifically
approved at least annually (i) by the Board of Trustees of
the Trust or by vote of a majority of the
outstanding voting securities of the Series, and (ii) by
vote of a majority of the trustees of the Trust
who are not interested persons of the Trust, the Manager or
the Sub-Adviser, cast in person at a
meeting called for the purpose of voting on such approval;
b. this Agreement may at any time be terminated on sixty
days' written notice to the Sub-Adviser either by vote of
the Board of Trustees of the Trust or by vote of a majority
of the
outstanding voting securities of the Series;
c. this Agreement shall automatically terminate in the
event of its assignment or upon the
termination of the Advisory Agreement;
d. this Agreement may be terminated by the Sub-Adviser
on sixty days' written notice to
the Manager and the Trust, or, if approved by the Board of
Trustees of the Trust, by the Manager on
sixty days' written notice to the Sub-Adviser; and
e. if the Sub-Adviser requires the Series to change its
name so as to eliminate all references
to the word "Alger," then this Agreement shall automatically
terminate at the time of such change
unless the continuance of this Agreement after such change
shall have been specifically approved
by vote of a majority of the outstanding voting securities
of the Series and by vote of a majority of
the Trustees of the Trust who are not interested persons of
the Trust or the Sub-Adviser, cast in
person at a meeting called for the purpose of voting on such
approval.
Termination of this Agreement pursuant to this Section 10
shall be without the payment of any
penalty.
11. Amendment. This Agreement may be amended at any time
by mutual consent of the
Manager and the Sub-Adviser, provided that, if required by
law, such amendment shall also have
been approved by vote of a majority of the outstanding
voting securities of the Series and by vote
of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or
the Sub-Adviser, cast in person at a meeting called for the
purpose of voting on such approval.
12. Certain Definitions. For the purpose of this
Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall
have their respective meanings defined in the 1940 Act,
subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission
under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any
employee, officer or agent of the
Sub-Adviser, and the Manager shall not be entitled to the
advice, recommendation or judgment of
any specific person; provided, however, that the persons
identified in the prospectus of the Series
shall perform the portfolio management duties described
therein until the Sub-Adviser notifies the
Manager that one or more other employees, officers or agents
of the Sub-Adviser, identified in such
notice, shall assume such duties as of a specific date.
b. If any term or provision of this Agreement or the
application thereof to any person or
circumstances is held to be invalid or unenforceable to any
extent, the remainder of this Agreement
or the application of such provision to other persons or
circumstances shall not be affected thereby
and shall be enforced to the fullest extent permitted by
law.
c. This Agreement shall be governed by and interpreted
in accordance with the laws of the
Commonwealth of Massachusetts.
TNE ADVISERS, INC.
By:
________________________________
Frederick K. Zimmermann
President
FRED ALGER MANAGEMENT, INC.
By:
_________________________________
Name:
______________________________
Title:
_______________________________
SUB-ADVISORY AGREEMENT
DRAYCOTT INTERNATIONAL EQUITY SERIES
This Sub-Advisory Agreement (this "Agreement") is
entered into as of December 29,
1995 by and among TNE Advisers, Inc., a Massachusetts
corporation (the "Manager"), and
Draycott Partners, Ltd., a Massachusetts corporation (the
"Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory
Agreement dated October 31,
1994 (the "Advisory Agreement") with New England Zenith Fund
(the "Trust"), pursuant to
which the Manager provides portfolio management and
administrative services to the
Draycott International Equity Series of the Trust (the
"Series");
WHEREAS, the Advisory Agreement provides that the
Manager may delegate any or
all of its portfolio management responsibilities under the
Advisory Agreement to one or more
sub-advisers;
WHEREAS, the Manager desires to retain the Sub-Adviser
to render portfolio
management services in the manner and on the terms set forth
in this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set
forth in this Agreement, the Manager and the Sub-Adviser
agree as follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the
supervision of the Manager and in
cooperation with any administrator appointed by the Manager
(the "Administrator"), manage
the investment and reinvestment of the assets of the Series.
The Sub-Adviser shall manage the
Series in conformity with (1) the investment objective,
policies and restrictions of the Series
set forth in the Trust's prospectus and statement of
additional information relating to the
Series, (2) any additional policies or guidelines
established by the Manager or by the Trust's
trustees that have been furnished in writing to the Sub-
Adviser and (3) the provisions of the
Internal Revenue Code (the "Code") applicable to "regulated
investment companies" (as
defined in Section 851 of the Code) and Section 817 of the
Code, all as from time to time in
effect (collectively, the "Policies"), and with all
applicable provisions of law, including without
limitation all applicable provisions of the Investment
Company Act of 1940 (the "1940 Act")
and the rules and regulations thereunder. Subject to the
foregoing, the Sub-Adviser is
authorized, in its discretion and without prior consultation
with the Manager, to buy, sell,
lend and otherwise trade in any stocks, bonds and other
securities and investment instruments
on behalf of the Series, without regard to the length of
time the securities have been held and
the resulting rate of portfolio turnover or any tax
considerations; and the majority or the
whole of the Series may be invested in such proportions of
stocks, bonds, other securities or
investment instruments, or cash, as the Sub-Adviser shall
determine. Notwithstanding the
foregoing provisions of this Section 1.a, however, the Sub-
Adviser shall, upon written
instructions from the Manager, effect such portfolio
transactions for the Series as the Manager
shall determine are necessary in order for the Series to
comply with the Policies.
b. The Sub-Adviser shall furnish the Manager and
the Administrator
monthly, quarterly and annual reports concerning
transactions and performance of the Series
in such form as may be mutually agreed upon, and agrees to
review the Series and discuss the
management of the Series with representatives or agents of
the Manager, the Administrator or
the Trust at their reasonable request. The Sub-Adviser
shall permit all books and records with
respect to the Series to be inspected and audited by the
Manager and the Administrator at all
reasonable times during normal business hours, upon
reasonable notice. The Sub-Adviser
shall also provide the Manager, the Administrator or the
Trust with such other information
and reports as may reasonably be requested by the Manager,
the Administrator or the Trust
from time to time, including without limitation all material
as reasonably may be requested
by the Trustees of the Trust pursuant to Section 15(c) of
the 1940 Act.
c. The Sub-Adviser shall provide to the Manager
a copy of its Form ADV
as filed with the Securities and Exchange Commission and as
amended from time to time and
a list of the persons whom the Sub-Adviser wishes to have
authorized to give written and/or
oral instructions to custodians of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the
Trust's custodian to provide)
timely information to the Sub-Adviser regarding such matters
as the composition of assets of
the Series, cash requirements and cash available for
investment in the Series, and all other
information as may be reasonably necessary for the Sub-
Adviser to perform its responsibilities
hereunder.
b. The Manager has furnished the Sub-Adviser a
copy of the prospectus
and statement of additional information of the Series and
agrees during the continuance of this
Agreement to furnish the Sub-Adviser copies of any revisions
or supplements thereto at, or, if
practicable, before the time the revisions or supplements
become effective. The Manager
agrees to furnish the Sub-Adviser with minutes of meetings
of the Trustees of the Trust
applicable to the Series to the extent they may affect the
duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the
Series to its shareholders, and any
further materials or information which the Sub-Adviser may
reasonably request to enable it to
perform its functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-
Adviser with a copy of the
Series's agreement with the custodian designated to hold the
assets of the Series (the
"Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such
modifications to be provided to the Sub-Adviser a reasonable
time in advance of the
effectiveness of such modifications. The assets of the
Series shall be maintained in the custody
of the Custodian identified in, and in accordance with the
terms and conditions of, the
Custody Agreement (or any sub-custodian properly appointed
as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the
acts or omissions of the
Custodian, unless such act or omission is required by and
taken in reliance upon instruction
given to the Custodian by a representative of the Sub-
Adviser properly authorized to give
such instruction under the Custody Agreement. Any assets
added to the Series shall be
delivered directly to the Custodian.
4. Expenses. Except for expenses specifically
assumed or agreed to be paid by the
Sub-Adviser pursuant hereto, the Sub-Adviser shall not be
liable for any expenses of the
Manager or the Trust including, without limitation, (a)
interest and taxes, (b) brokerage
commissions and other costs in connection with the purchase
or sale of securities or other
investment instruments with respect to the Series, and (c)
custodian fees and expenses. The
Sub-Adviser will pay its own expenses incurred in furnishing
the services to be provided by it
pursuant to this Agreement.
5. Purchase and Sale of Assets. Absent instructions
from the Manager to the
contrary, the Sub-Adviser shall place all orders for the
purchase and sale of securities for the
Series with brokers or dealers selected by the Sub-Adviser,
which may include brokers or
dealers affiliated with the Sub-Adviser, provided such
orders comply with Rule 17e-1 under
the 1940 Act in all respects. To the extent consistent with
applicable law, purchase or sell
orders for the Series may be aggregated with contemporaneous
purchase or sell orders of other
clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of
transactions for the Series at prices which are advantageous
to the Series and at commission
rates that are reasonable in relation to the benefits
received.
6. Compensation of the Sub-Adviser. As full
compensation for all services
rendered, facilities furnished and expenses borne by the Sub-
Adviser hereunder, the Manager
shall pay the Sub-Adviser compensation at the annual rate of
0.75% of the first $10 million of
the average daily net assets of the Series, 0.60% of the
next $40 million of such assets and
0.45% of such assets in excess of $50 million. Such
compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than
quarterly, as the Manager is paid by
the Series pursuant to the Advisory Agreement. The Manager
may from time to time waive
the compensation it is entitled to receive from the Trust,
however, and such waiver will have
no effect on the Manager's obligation to pay the Sub-Adviser
the compensation provided for
herein.
7. Non-Exclusivity. The Manager and the Series agree
that the services of the Sub-Adviser are not to be deemed
exclusive and that the Sub-Adviser and its affiliates are
free to
act as investment manager and provide other services to
various investment companies and
other managed accounts, except as the Sub-Adviser and the
Manager or the Administrator
may otherwise agree from time to time in writing before or
after the date hereof. This
Agreement shall not in any way limit or restrict the Sub-
Adviser or any of its directors,
officers, employees or agents from buying, selling or
trading any securities or other
investment instruments for its or their own account or for
the account of others for whom it
or they may be acting, provided that such activities do not
adversely affect or otherwise
impair the performance by the Sub-Adviser of its duties and
obligations under this
Agreement. The Manager and the Series recognize and agree
that the Sub-Adviser may
provide advice to or take action with respect to other
clients, which advice or action,
including the timing and nature of such action, may differ
from or be identical to advice given
or action taken with respect to the Series. The Sub-Adviser
shall for all purposes hereof be
deemed to be an independent contractor and shall, unless
otherwise provided or authorized,
have no authority to act for or represent the Trust or the
Manager in any way or otherwise be
deemed an agent of the Trust or the Manager.
8. Liability. Except as may otherwise be provided by
the 1940 Act or other
federal securities laws, neither the Sub-Adviser nor any of
its officers, directors, employees or
agents (the "Indemnified Parties") shall be subject to any
liability to the Manager, the Trust,
the Series or any shareholder of the Series for any error of
judgment, any mistake of law or
any loss arising out of any investment or other act or
omission in the course of, connected
with, or arising out of any service to be rendered under
this Agreement, except by reason of
willful misfeasance, bad faith or gross negligence in the
performance of the Sub-Adviser's
duties or by reason of reckless disregard by the Sub-Adviser
of its obligations and duties. The
Manager shall hold harmless and indemnify the Sub-Adviser
for any loss, liability, cost,
damage or expense (including reasonable attorneys fees and
costs) arising from any claim or
demand by any past or present shareholder of the Series that
is not based upon the obligations
of the Sub-Adviser with respect to the Series under this
Agreement. The Manager
acknowledges and agrees that the Sub-Adviser makes no any
representation or warranty,
express or implied, that any level of performance or
investment results will be achieved by the
Series or that the Series will perform comparably with any
standard or index, including other
clients of the Sub-Adviser, whether public or private.
9. Effective Date and Termination. This Agreement
shall become effective as of
the date of its execution, and
a. unless otherwise terminated, this Agreement
shall continue in effect for
two years from the date of execution, and from year to year
thereafter so long as such
continuance is specifically approved at least annually (i)
by the Board of Trustees of the Trust
or by vote of a majority of the outstanding voting
securities of the Series, and (ii) by vote of a
majority of the trustees of the Trust who are not interested
persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for
the purpose of voting on such
approval;
b. this Agreement may at any time be terminated
on sixty days' written
notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Series;
c. this Agreement shall automatically terminate
in the event of its
assignment or upon the termination of the Advisory
Agreement;
d. this Agreement may be terminated by the Sub-
Adviser on sixty days'
written notice to the Manager and the Trust, or, if approved
by the Board of Trustees of the
Trust, by the Manager on sixty days' written notice to the
Sub-Adviser; and
e. if the Sub-Adviser requires the Series to
change its name so as to
eliminate all references to the word "Draycott" then this
Agreement shall automatically
terminate at the time of such change unless the continuance
of this Agreement after such
change shall have been specifically approved by vote of a
majority of the outstanding voting
securities of the Series and by vote of a majority of the
Trustees of the Trust who are not
interested persons of the Trust or the Sub-Adviser, cast in
person at a meeting called for the
purpose of voting on such approval.
Termination of this Agreement pursuant to this Section
9 shall be without the
payment of any penalty.
10. Amendment. This Agreement may be amended at any
time by mutual consent
of the parties, provided that, if required by law, such
amendment shall also have been
approved by vote of a majority of the outstanding voting
securities of the Series and by vote of
a majority of the trustees of the Trust who are not
interested persons of the Trust, the
Manager or the Sub-Adviser, cast in person at a meeting
called for the purpose of voting on
such approval.
11. Certain Definitions. For the purpose of this
Agreement, the terms "vote of a
majority of the outstanding voting securities," "interested
person," "affiliated person" and
"assignment" shall have their respective meanings defined in
the 1940 Act, subject, however,
to such exemptions as may be granted by the Securities and
Exchange Commission under the
1940 Act.
12. General.
a. The Sub-Adviser may perform its services
through any employee, officer
or agent, and the Manager shall not be entitled to the
advice, recommendation or judgment of
any specific person; provided, however, that the persons
identified in the prospectus of the
Series shall perform the portfolio management duties
described therein until the Sub-Adviser
notifies the Manager that one or more other employees,
officers or agents identified in such
notice shall assume such duties as of a specific date.
b. If any term or provision of this Agreement or
the application thereof to
any person or circumstances is held to be invalid or
unenforceable to any extent, the
remainder of this Agreement or the application of such
provision to other persons or
circumstances shall not be affected thereby and shall be
enforced to the fullest extent
permitted by law.
c. This Agreement shall be governed by and
interpreted in accordance
with the laws of the Commonwealth of Massachusetts.
TNE ADVISERS, INC.
By:
Frederick K. Zimmermann
President
DRAYCOTT PARTNERS, LTD.
By:
Name:
Title:
SUB-ADVISORY AGREEMENT
DRAYCOTT INTERNATIONAL EQUITY SERIES
This Sub-Advisory Agreement (this "Agreement") is
entered into as of February 29,
1996 by and among TNE Advisers, Inc., a Massachusetts
corporation (the "Manager"), and
Draycott Partners, Ltd., a Massachusetts corporation (the
"Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory
Agreement dated October 31,
1994 (the "Advisory Agreement") with New England Zenith Fund
(the "Trust"), pursuant to
which the Manager provides portfolio management and
administrative services to the
Draycott International Equity Series of the Trust (the
"Series");
WHEREAS, the Advisory Agreement provides that the
Manager may delegate any or
all of its portfolio management responsibilities under the
Advisory Agreement to one or more
sub-advisers;
WHEREAS, the Manager desires to retain the Sub-Adviser
to render portfolio
management services in the manner and on the terms set forth
in this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set
forth in this Agreement, the Manager and the Sub-Adviser
agree as follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the
supervision of the Manager and in
cooperation with any administrator appointed by the Manager
(the "Administrator"), manage
the investment and reinvestment of the assets of the Series.
The Sub-Adviser shall manage the
Series in conformity with (1) the investment objective,
policies and restrictions of the Series
set forth in the Trust's prospectus and statement of
additional information relating to the
Series, (2) any additional policies or guidelines
established by the Manager or by the Trust's
trustees that have been furnished in writing to the Sub-
Adviser and (3) the provisions of the
Internal Revenue Code (the "Code") applicable to "regulated
investment companies" (as
defined in Section 851 of the Code) and Section 817 of the
Code, all as from time to time in
effect (collectively, the "Policies"), and with all
applicable provisions of law, including without
limitation all applicable provisions of the Investment
Company Act of 1940 (the "1940 Act")
and the rules and regulations thereunder. Subject to the
foregoing, the Sub-Adviser is
authorized, in its discretion and without prior consultation
with the Manager, to buy, sell,
lend and otherwise trade in any stocks, bonds and other
securities and investment instruments
on behalf of the Series, without regard to the length of
time the securities have been held and
the resulting rate of portfolio turnover or any tax
considerations; and the majority or the
whole of the Series may be invested in such proportions of
stocks, bonds, other securities or
investment instruments, or cash, as the Sub-Adviser shall
determine. Notwithstanding the
foregoing provisions of this Section 1.a, however, the Sub-
Adviser shall, upon written
instructions from the Manager, effect such portfolio
transactions for the Series as the Manager
shall determine are necessary in order for the Series to
comply with the Policies.
b. The Sub-Adviser shall furnish the Manager and
the Administrator
monthly, quarterly and annual reports concerning
transactions and performance of the Series
in such form as may be mutually agreed upon, and agrees to
review the Series and discuss the
management of the Series with representatives or agents of
the Manager, the Administrator or
the Trust at their reasonable request. The Sub-Adviser
shall permit all books and records with
respect to the Series to be inspected and audited by the
Manager and the Administrator at all
reasonable times during normal business hours, upon
reasonable notice. The Sub-Adviser
shall also provide the Manager, the Administrator or the
Trust with such other information
and reports as may reasonably be requested by the Manager,
the Administrator or the Trust
from time to time, including without limitation all material
as reasonably may be requested
by the Trustees of the Trust pursuant to Section 15(c) of
the 1940 Act.
c. The Sub-Adviser shall provide to the Manager
a copy of its Form ADV
as filed with the Securities and Exchange Commission and as
amended from time to time and
a list of the persons whom the Sub-Adviser wishes to have
authorized to give written and/or
oral instructions to custodians of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the
Trust's custodian to provide)
timely information to the Sub-Adviser regarding such matters
as the composition of assets of
the Series, cash requirements and cash available for
investment in the Series, and all other
information as may be reasonably necessary for the Sub-
Adviser to perform its responsibilities
hereunder.
b. The Manager has furnished the Sub-Adviser a
copy of the prospectus
and statement of additional information of the Series and
agrees during the continuance of this
Agreement to furnish the Sub-Adviser copies of any revisions
or supplements thereto at, or, if
practicable, before the time the revisions or supplements
become effective. The Manager
agrees to furnish the Sub-Adviser with minutes of meetings
of the Trustees of the Trust
applicable to the Series to the extent they may affect the
duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the
Series to its shareholders, and any
further materials or information which the Sub-Adviser may
reasonably request to enable it to
perform its functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-
Adviser with a copy of the
Series's agreement with the custodian designated to hold the
assets of the Series (the
"Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such
modifications to be provided to the Sub-Adviser a reasonable
time in advance of the
effectiveness of such modifications. The assets of the
Series shall be maintained in the custody
of the Custodian identified in, and in accordance with the
terms and conditions of, the
Custody Agreement (or any sub-custodian properly appointed
as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the
acts or omissions of the
Custodian, unless such act or omission is required by and
taken in reliance upon instruction
given to the Custodian by a representative of the Sub-
Adviser properly authorized to give
such instruction under the Custody Agreement. Any assets
added to the Series shall be
delivered directly to the Custodian.
4. Expenses. Except for expenses specifically
assumed or agreed to be paid by the
Sub-Adviser pursuant hereto, the Sub-Adviser shall not be
liable for any expenses of the
Manager or the Trust including, without limitation, (a)
interest and taxes, (b) brokerage
commissions and other costs in connection with the purchase
or sale of securities or other
investment instruments with respect to the Series, and (c)
custodian fees and expenses. The
Sub-Adviser will pay its own expenses incurred in furnishing
the services to be provided by it
pursuant to this Agreement.
5. Purchase and Sale of Assets. Absent instructions
from the Manager to the
contrary, the Sub-Adviser shall place all orders for the
purchase and sale of securities for the
Series with brokers or dealers selected by the Sub-Adviser,
which may include brokers or
dealers affiliated with the Sub-Adviser, provided such
orders comply with Rule 17e-1 under
the 1940 Act in all respects. To the extent consistent with
applicable law, purchase or sell
orders for the Series may be aggregated with contemporaneous
purchase or sell orders of other
clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of
transactions for the Series at prices which are advantageous
to the Series and at commission
rates that are reasonable in relation to the benefits
received.
6. Compensation of the Sub-Adviser. As full
compensation for all services
rendered, facilities furnished and expenses borne by the Sub-
Adviser hereunder, the Manager
shall pay the Sub-Adviser compensation at the annual rate of
0.75% of the first $10 million of
the average daily net assets of the Series, 0.60% of the
next $40 million of such assets and
0.45% of such assets in excess of $50 million. Such
compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than
quarterly, as the Manager is paid by
the Series pursuant to the Advisory Agreement. The Manager
may from time to time waive
the compensation it is entitled to receive from the Trust,
however, and such waiver will have
no effect on the Manager's obligation to pay the Sub-Adviser
the compensation provided for
herein.
7. Non-Exclusivity. The Manager and the Series agree
that the services of the Sub-Adviser are not to be deemed
exclusive and that the Sub-Adviser and its affiliates are
free to
act as investment manager and provide other services to
various investment companies and
other managed accounts, except as the Sub-Adviser and the
Manager or the Administrator
may otherwise agree from time to time in writing before or
after the date hereof. This
Agreement shall not in any way limit or restrict the Sub-
Adviser or any of its directors,
officers, employees or agents from buying, selling or
trading any securities or other
investment instruments for its or their own account or for
the account of others for whom it
or they may be acting, provided that such activities do not
adversely affect or otherwise
impair the performance by the Sub-Adviser of its duties and
obligations under this
Agreement. The Manager and the Series recognize and agree
that the Sub-Adviser may
provide advice to or take action with respect to other
clients, which advice or action,
including the timing and nature of such action, may differ
from or be identical to advice given
or action taken with respect to the Series. The Sub-Adviser
shall for all purposes hereof be
deemed to be an independent contractor and shall, unless
otherwise provided or authorized,
have no authority to act for or represent the Trust or the
Manager in any way or otherwise be
deemed an agent of the Trust or the Manager.
8. Liability. Except as may otherwise be provided by
the 1940 Act or other
federal securities laws, neither the Sub-Adviser nor any of
its officers, directors, employees or
agents (the "Indemnified Parties") shall be subject to any
liability to the Manager, the Trust,
the Series or any shareholder of the Series for any error of
judgment, any mistake of law or
any loss arising out of any investment or other act or
omission in the course of, connected
with, or arising out of any service to be rendered under
this Agreement, except by reason of
willful misfeasance, bad faith or gross negligence in the
performance of the Sub-Adviser's
duties or by reason of reckless disregard by the Sub-Adviser
of its obligations and duties. The
Manager shall hold harmless and indemnify the Sub-Adviser
for any loss, liability, cost,
damage or expense (including reasonable attorneys fees and
costs) arising from any claim or
demand by any past or present shareholder of the Series that
is not based upon the obligations
of the Sub-Adviser with respect to the Series under this
Agreement. The Manager
acknowledges and agrees that the Sub-Adviser makes no any
representation or warranty,
express or implied, that any level of performance or
investment results will be achieved by the
Series or that the Series will perform comparably with any
standard or index, including other
clients of the Sub-Adviser, whether public or private.
9. Effective Date and Termination. This Agreement
shall become effective as of
the date of its execution, and
a. unless otherwise terminated, this Agreement
shall continue in effect for
two years from the date of execution, and from year to year
thereafter so long as such
continuance is specifically approved at least annually (i)
by the Board of Trustees of the Trust
or by vote of a majority of the outstanding voting
securities of the Series, and (ii) by vote of a
majority of the trustees of the Trust who are not interested
persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for
the purpose of voting on such
approval;
b. this Agreement may at any time be terminated
on sixty days' written
notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Series;
c. this Agreement shall automatically terminate
in the event of its
assignment or upon the termination of the Advisory
Agreement;
d. this Agreement may be terminated by the Sub-
Adviser on sixty days'
written notice to the Manager and the Trust, or, if approved
by the Board of Trustees of the
Trust, by the Manager on sixty days' written notice to the
Sub-Adviser; and
e. if the Sub-Adviser requires the Series to
change its name so as to
eliminate all references to the word "Draycott" then this
Agreement shall automatically
terminate at the time of such change unless the continuance
of this Agreement after such
change shall have been specifically approved by vote of a
majority of the outstanding voting
securities of the Series and by vote of a majority of the
Trustees of the Trust who are not
interested persons of the Trust or the Sub-Adviser, cast in
person at a meeting called for the
purpose of voting on such approval.
Termination of this Agreement pursuant to this Section
9 shall be without the
payment of any penalty.
10. Amendment. This Agreement may be amended at any
time by mutual consent
of the parties, provided that, if required by law, such
amendment shall also have been
approved by vote of a majority of the outstanding voting
securities of the Series and by vote of
a majority of the trustees of the Trust who are not
interested persons of the Trust, the
Manager or the Sub-Adviser, cast in person at a meeting
called for the purpose of voting on
such approval.
11. Certain Definitions. For the purpose of this
Agreement, the terms "vote of a
majority of the outstanding voting securities," "interested
person," "affiliated person" and
"assignment" shall have their respective meanings defined in
the 1940 Act, subject, however,
to such exemptions as may be granted by the Securities and
Exchange Commission under the
1940 Act.
12. General.
a. The Sub-Adviser may perform its services
through any employee, officer
or agent, and the Manager shall not be entitled to the
advice, recommendation or judgment of
any specific person; provided, however, that the persons
identified in the prospectus of the
Series shall perform the portfolio management duties
described therein until the Sub-Adviser
notifies the Manager that one or more other employees,
officers or agents identified in such
notice shall assume such duties as of a specific date.
b. If any term or provision of this Agreement or
the application thereof to
any person or circumstances is held to be invalid or
unenforceable to any extent, the
remainder of this Agreement or the application of such
provision to other persons or
circumstances shall not be affected thereby and shall be
enforced to the fullest extent
permitted by law.
c. This Agreement shall be governed by and
interpreted in accordance
with the laws of the Commonwealth of Massachusetts.
TNE ADVISERS, INC.
By:
Frederick K. Zimmermann
President
DRAYCOTT PARTNERS, LTD.
By:
Name:
Title:
NEW ENGLAND ZENITH FUND
POWER OF ATTORNEY
We, the undersigned members of the Board of Trustees of
New England Zenith Fund, hereby severally constitute and
appoint Anne M. Goggin, Frederick K. Zimmermann, Frank Nesvet,
Beverly J. DeWitt and John F. Guthrie, Jr. and each of them
singly, our true and lawful attorneys, with full power to them
and each of them to sign, for us, and in our names and in the
capacities indicated below, any and all registration statements
and any and all amendments thereto to be filed with the
Securities and Exchange Commission, pursuant to the Securities
Act of 1933 and/or the Investment Company Act of 1940, hereby
ratifying and confirming our signatures as they may be signed
by our said attorneys to any and all such registration
statements and amendments thereto.
Witness our hands on the date set forth below.
Signature Title Date
Member of the May 31, 1995
/s/ NANCY HAWTHORNE Board of Trustees
Nancy Hawthorne
Member of the May 31, 1995
/s/ JOSEPH M. HINCHEY Board of Trustees
Joseph M. Hinchey
Member of the May 31, 1995
/s/ RICHARD S. HINCHEY, JR Board of Trustees
Richard S. Humphrey,
Jr.
Member of the May 31, 1995
/s/ ROBERT B. KITTEDGE Board of Trustees
Robert B. Kittredge
Member of the May 31, 1995
/s/ LAURENS MACLURE Board of Trustees
Laurens MacLure
Member of the May 31, 1995
/s/ DALE ROGERS MARSHALL Board of Trustees
Dale Rogers Marshall
Member of the May 31, 1995
/s/ JOSEPH F. TURLEY Board of Trustees
Joseph F. Turley
NEW ENGLAND ZENITH FUND
POWER OF ATTORNEY
I, the undersigned member of the Board of Trustees of New
England Zenith Fund, hereby severally constitute and appoint
Frederick K. Zimmermann, Frank Nesvet, Beverly J. DeWitt and
John F. Guthrie, Jr. and each of them singly, my true and
lawful attorneys, with full power to them and each of them to
sign, for me, and in my name and in the capacities indicated
below, any and all registration statements and any and all
amendments thereto to be filed with the Securities and Exchange
Commission, pursuant to the Securities Act of 1933 and/or the
Investment Company Act of 1940, hereby ratifying and confirming
my signature as it may be signed by my said attorneys to any
and all such registration statements and amendments thereto.
Witness my hand on the 31st of May, 1995.
/s/ ANNE GOGGIN
Anne M. Goggin
Trustee
NEW ENGLAND ZENITH FUND
POWER OF ATTORNEY
I, the undersigned member of the Board of Trustees of New
England Zenith Fund, hereby severally constitute and appoint
Anne M. Goggin, Frank Nesvet, Beverly J. DeWitt and John F.
Guthrie, Jr. and each of them singly, my true and lawful
attorneys, with full power to them and each of them to sign,
for me, and in my name and in the capacities indicated below,
any and all registration statements and any and all amendments
thereto to be filed with the Securities and Exchange
Commission, pursuant to the Securities Act of 1933 and/or the
Investment Company Act of 1940, hereby ratifying and confirming
my signature as it may be signed by my said attorneys to any
and all such registration statements and amendments thereto.
Witness my hand on the 31st of May, 1995.
/s/ FREDERICK K. ZIMMERMANN
Frederick K. Zimmermann
Chairman of the Board of
Trustees
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
New England Zenith Fund:
We consent to the inclusion in Post-Effective Amendment No. 21
to the Registration Statement of New England Zenith Fund
(comprising, respectively, the Back Bay Advisors Bond Income
Series, Capital Growth Series, Back Bay Advisors Money Market
Series, Westpeak Stock Index Series, Back Bay Advisors Managed
Series, Loomis Sayles Avanti Growth Series, Westpeak Value
Growth Series, Loomis Sayles Balanced Series, Draycott
International Equity Series, Salomon Brothers U.S. Government
Series, Salomon Brothers Strategic Bond Opportunities Series,
Venture Value Series, Alger Equity Growth Series and Loomis
Sayles Small Cap Series - the "Series") on Form N-1A of our
report dated February 7, 1996 on our audit of the financial
statements and financial highlights of the respective Series,
which report is included in the Annual Report to Shareholders
for the year ended December 31, 1995, which is included in the
Registration Statement. We also consent to the reference to our
Firm under the captions "Independent Accountants" and "Experts".
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 26, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> SMALL CAP
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> BALANCED
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> U.S. GOVERNMENT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 8,058,361
<INVESTMENTS-AT-VALUE> 8,252,725
<RECEIVABLES> 102,406
<ASSETS-OTHER> 8,050
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,363,181
<PAYABLE-FOR-SECURITIES> 795,977
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,168
<TOTAL-LIABILITIES> 821,145
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,332,248
<SHARES-COMMON-STOCK> 683,462
<SHARES-COMMON-PRIOR> 202,008
<ACCUMULATED-NII-CURRENT> 214,389
<OVERDISTRIBUTION-NII> 735
<ACCUMULATED-NET-GAINS> 14,689
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 194,364
<NET-ASSETS> 7,542,036
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 240,412
<OTHER-INCOME> 0
<EXPENSES-NET> 26,023
<NET-INVESTMENT-INCOME> 214,389
<REALIZED-GAINS-CURRENT> 71,273
<APPREC-INCREASE-CURRENT> 195,460
<NET-CHANGE-FROM-OPS> 481,122
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 215,390
<DISTRIBUTIONS-OF-GAINS> 50,946
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 671,863
<NUMBER-OF-SHARES-REDEEMED> (214,709)
<SHARES-REINVESTED> 24,300
<NET-CHANGE-IN-ASSETS> 5,530,345
<ACCUMULATED-NII-PRIOR> 19,034
<ACCUMULATED-GAINS-PRIOR> (6,247)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 20,446
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 110,646
<AVERAGE-NET-ASSETS> 3,717,449
<PER-SHARE-NAV-BEGIN> 9.96
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 1.16
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.41)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.04
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> STRATEGIC BOND OPP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 9,302,037
<INVESTMENTS-AT-VALUE> 9,491,783
<RECEIVABLES> 2,125,386
<ASSETS-OTHER> 29,666
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,646,835
<PAYABLE-FOR-SECURITIES> 295,750
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,866,961
<TOTAL-LIABILITIES> 2,162,711
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,260,335
<SHARES-COMMON-STOCK> 874,477
<SHARES-COMMON-PRIOR> 354,325
<ACCUMULATED-NII-CURRENT> 460,904
<OVERDISTRIBUTION-NII> 50,354
<ACCUMULATED-NET-GAINS> 19,941
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 153,494
<NET-ASSETS> 9,484,124
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 506,785
<OTHER-INCOME> 0
<EXPENSES-NET> 45,881
<NET-INVESTMENT-INCOME> 460,904
<REALIZED-GAINS-CURRENT> 248,441
<APPREC-INCREASE-CURRENT> 208,090
<NET-CHANGE-FROM-OPS> 917,435
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 435,233
<DISTRIBUTIONS-OF-GAINS> 170,001
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 919,222
<NUMBER-OF-SHARES-REDEEMED> (455,476)
<SHARES-REINVESTED> 56,406
<NET-CHANGE-IN-ASSETS> 6,033,959
<ACCUMULATED-NII-PRIOR> 40,922
<ACCUMULATED-GAINS-PRIOR> (36,161)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 35,085
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 134,001
<AVERAGE-NET-ASSETS> 5,397,692
<PER-SHARE-NAV-BEGIN> 9.74
<PER-SHARE-NII> 0.58
<PER-SHARE-GAIN-APPREC> 1.30
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.77)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.85
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> VENTURE VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 31,111,677
<INVESTMENTS-AT-VALUE> 35,054,484
<RECEIVABLES> 172,837
<ASSETS-OTHER> 13,879
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,241,200
<PAYABLE-FOR-SECURITIES> 142,266
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53,967
<TOTAL-LIABILITIES> 196,233
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31,014,881
<SHARES-COMMON-STOCK> 2,674,422
<SHARES-COMMON-PRIOR> 350,592
<ACCUMULATED-NII-CURRENT> 246,049
<OVERDISTRIBUTION-NII> 3,911
<ACCUMULATED-NET-GAINS> 83,368
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,942,807
<NET-ASSETS> 35,044,967
<DIVIDEND-INCOME> 300,211
<INTEREST-INCOME> 104,200
<OTHER-INCOME> 0
<EXPENSES-NET> 158,362
<NET-INVESTMENT-INCOME> 246,049
<REALIZED-GAINS-CURRENT> 600,646
<APPREC-INCREASE-CURRENT> 3,966,150
<NET-CHANGE-FROM-OPS> 4,812,845
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 244,485
<DISTRIBUTIONS-OF-GAINS> 517,278
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,627,688
<NUMBER-OF-SHARES-REDEEMED> (362,591)
<SHARES-REINVESTED> 58,733
<NET-CHANGE-IN-ASSETS> 31,673,523
<ACCUMULATED-NII-PRIOR> 8,452
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 131,969
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 267,333
<AVERAGE-NET-ASSETS> 17,595,840
<PER-SHARE-NAV-BEGIN> 9.62
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> 3.68
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.30)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.10
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> EQUITY GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 43,792,064
<INVESTMENTS-AT-VALUE> 48,292,954
<RECEIVABLES> 259,065
<ASSETS-OTHER> 7,705
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 48,559,724
<PAYABLE-FOR-SECURITIES> 2,110,953
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 62,369
<TOTAL-LIABILITIES> 2,173,322
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,729,581
<SHARES-COMMON-STOCK> 3,362,196
<SHARES-COMMON-PRIOR> 200,421
<ACCUMULATED-NII-CURRENT> 30,373
<OVERDISTRIBUTION-NII> 1,354
<ACCUMULATED-NET-GAINS> (845,423)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,500,890
<NET-ASSETS> 46,386,402
<DIVIDEND-INCOME> 81,944
<INTEREST-INCOME> 124,430
<OTHER-INCOME> 0
<EXPENSES-NET> 176,001
<NET-INVESTMENT-INCOME> 30,373
<REALIZED-GAINS-CURRENT> 448,499
<APPREC-INCREASE-CURRENT> 4,579,507
<NET-CHANGE-FROM-OPS> 5,058,379
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (31,366)
<DISTRIBUTIONS-OF-GAINS> (1,285,986)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,648,304
<NUMBER-OF-SHARES-REDEEMED> (583,251)
<SHARES-REINVESTED> 96,622
<NET-CHANGE-IN-ASSETS> 44,469,489
<ACCUMULATED-NII-PRIOR> 3,467
<ACCUMULATED-GAINS-PRIOR> (7,937)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 144,943
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 253,255
<AVERAGE-NET-ASSETS> 20,706,097
<PER-SHARE-NAV-BEGIN> 9.56
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 4.65
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.42)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.80
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 08
<NAME> BOND INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 153,291,110
<INVESTMENTS-AT-VALUE> 159,845,300
<RECEIVABLES> 3,174,177
<ASSETS-OTHER> 7,615
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 163,027,092
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 315,142
<TOTAL-LIABILITIES> 315,142
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 156,446,786
<SHARES-COMMON-STOCK> 1,497,241
<SHARES-COMMON-PRIOR> 1,321,363
<ACCUMULATED-NII-CURRENT> 10,335,393
<OVERDISTRIBUTION-NII> 53,292
<ACCUMULATED-NET-GAINS> (341,858)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,553,730
<NET-ASSETS> 162,711,950
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,118,852
<OTHER-INCOME> 0
<EXPENSES-NET> 783,459
<NET-INVESTMENT-INCOME> 10,335,393
<REALIZED-GAINS-CURRENT> 1,559,812
<APPREC-INCREASE-CURRENT> 15,392,179
<NET-CHANGE-FROM-OPS> 27,287,384
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,988,438
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 440,564
<NUMBER-OF-SHARES-REDEEMED> (356,518)
<SHARES-REINVESTED> 91,832
<NET-CHANGE-IN-ASSETS> 36,478,333
<ACCUMULATED-NII-PRIOR> 10,335,393
<ACCUMULATED-GAINS-PRIOR> (2,245,611)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 572,279
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 783,459
<AVERAGE-NET-ASSETS> 143,069,750
<PER-SHARE-NAV-BEGIN> 95.53
<PER-SHARE-NII> 7.34
<PER-SHARE-GAIN-APPREC> 12.85
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (7.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 108.67
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 09
<NAME> CAPITAL GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 786,894,415
<INVESTMENTS-AT-VALUE> 913,152,250
<RECEIVABLES> 23,888,206
<ASSETS-OTHER> 956
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 937,041,412
<PAYABLE-FOR-SECURITIES> 14,184,326
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,413,266
<TOTAL-LIABILITIES> 15,597,592
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 775,378,866
<SHARES-COMMON-STOCK> 2,459,656
<SHARES-COMMON-PRIOR> 2,136,207
<ACCUMULATED-NII-CURRENT> 7,450,611
<OVERDISTRIBUTION-NII> 28,556
<ACCUMULATED-NET-GAINS> 19,778,563
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 126,257,835
<NET-ASSETS> 921,443,820
<DIVIDEND-INCOME> 13,027,061
<INTEREST-INCOME> 124,993
<OTHER-INCOME> 0
<EXPENSES-NET> 5,701,443
<NET-INVESTMENT-INCOME> 7,450,611
<REALIZED-GAINS-CURRENT> 132,068,325
<APPREC-INCREASE-CURRENT> 114,117,353
<NET-CHANGE-FROM-OPS> 253,636,289
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,422,072
<DISTRIBUTIONS-OF-GAINS> 112,289,797
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 561,255
<NUMBER-OF-SHARES-REDEEMED> (559,603)
<SHARES-REINVESTED> 321,797
<NET-CHANGE-IN-ASSETS> 254,317,119
<ACCUMULATED-NII-PRIOR> 10,848,989
<ACCUMULATED-GAINS-PRIOR> 18,279,890
<OVERDISTRIB-NII-PRIOR> (278,739)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,232,562
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,701,443
<AVERAGE-NET-ASSETS> 813,760,395
<PER-SHARE-NAV-BEGIN> 312.30
<PER-SHARE-NII> 3.47
<PER-SHARE-GAIN-APPREC> 114.91
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (56.06)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 374.62
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 88,939,687
<INVESTMENTS-AT-VALUE> 88,939,687
<RECEIVABLES> 1,994,417
<ASSETS-OTHER> 5,185
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 90,939,289
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 791,130
<TOTAL-LIABILITIES> 791,130
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 90,148,159
<SHARES-COMMON-STOCK> 901,482
<SHARES-COMMON-PRIOR> 739,604
<ACCUMULATED-NII-CURRENT> 4,403,095
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 88,939,687
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,800,248
<OTHER-INCOME> 0
<EXPENSES-NET> 397,153
<NET-INVESTMENT-INCOME> (4,403,095)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,403,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,403,095
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,410,130
<NUMBER-OF-SHARES-REDEEMED> (1,291,563)
<SHARES-REINVESTED> 43,311
<NET-CHANGE-IN-ASSETS> 16,187,766
<ACCUMULATED-NII-PRIOR> 2,614,216
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 278,007
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 405,685
<AVERAGE-NET-ASSETS> 79,430,697
<PER-SHARE-NAV-BEGIN> 100.00
<PER-SHARE-NII> 5.50
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (5.50)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 100.00
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> STOCK INDEX
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 43,178,809
<INVESTMENTS-AT-VALUE> 58,613,899
<RECEIVABLES> 164,689
<ASSETS-OTHER> 201
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58,778,789
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 108,167
<TOTAL-LIABILITIES> 108,167
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43,247,821
<SHARES-COMMON-STOCK> 586,173
<SHARES-COMMON-PRIOR> 493,245
<ACCUMULATED-NII-CURRENT> 1,070,362
<OVERDISTRIBUTION-NII> 20,255
<ACCUMULATED-NET-GAINS> (32,544)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,435,090
<NET-ASSETS> 58,670,622
<DIVIDEND-INCOME> 1,212,104
<INTEREST-INCOME> 54,033
<OTHER-INCOME> 0
<EXPENSES-NET> 195,775
<NET-INVESTMENT-INCOME> 1,070,362
<REALIZED-GAINS-CURRENT> 775,273
<APPREC-INCREASE-CURRENT> 13,212,050
<NET-CHANGE-FROM-OPS> 15,057,685
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,050,107
<DISTRIBUTIONS-OF-GAINS> 673,888
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 202,803
<NUMBER-OF-SHARES-REDEEMED> (127,215)
<SHARES-REINVESTED> 17,340
<NET-CHANGE-IN-ASSETS> 21,506,334
<ACCUMULATED-NII-PRIOR> 861,746
<ACCUMULATED-GAINS-PRIOR> 85,627
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 122,359
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 195,775
<AVERAGE-NET-ASSETS> 48,943,424
<PER-SHARE-NAV-BEGIN> 75.35
<PER-SHARE-NII> 1.88
<PER-SHARE-GAIN-APPREC> 25.89
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (3.03)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 100.09
<EXPENSE-RATIO> 0.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> MANAGED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 111,742,538
<INVESTMENTS-AT-VALUE> 146,511,094
<RECEIVABLES> 1,161,934
<ASSETS-OTHER> 135,411
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 147,808,439
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 272,703
<TOTAL-LIABILITIES> 272,703
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 112,364,892
<SHARES-COMMON-STOCK> 902,267
<SHARES-COMMON-PRIOR> 935,395
<ACCUMULATED-NII-CURRENT> 5,487,603
<OVERDISTRIBUTION-NII> 45,930
<ACCUMULATED-NET-GAINS> 356,254
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 34,768,660
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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